Starting a new business? Here's what you need to know to get things set up properly. If you have suggestions for additions to this checklist, feel free to send me an email.

1. Choose Your Business Structure

If you don't actively choose a business structure, you'll automatically be a sole proprietorship (if you're the only owner) or a partnership (if there are two or more owners). For tax purposes, married couples count as one owner. However, forming a corporation or LLC often has significant advantages. For most people, the decision comes down to choosing between an S corporation and an LLC.

2. Create a Written Operating Agreement (Multiple Owners)

If your business has more than one owner, get a written operating agreement. This document needs to address crucial questions like: How will you divide profits and losses? When will you distribute cash? What happens if the company needs additional funding? What's the plan if an owner becomes disabled or dies? What if someone wants to leave the business? What are your long-term company goals?

3. Set Up Your Bookkeeping System

Your business needs a proper system to track income and expenses. If you only have a few expenses each month, an expense tracker app that scans receipts can work. For most businesses, QuickBooks is the standard. Many clients use QuickBooks Online and grant access so I can pull reports for tax returns.

4. File Your Beneficial Ownership Report (Critical!)

Starting January 1, 2024, new businesses must file a report with the U.S. Treasury disclosing who owns the entity within 30 days of formation. The penalty for missing this is massive — $500 per day. This applies to corporations, LLCs (including single‑member LLCs), and any other entity that must register with a Secretary of State. There are some exceptions, like companies with 20 or more full‑time employees. This requirement is currently being appealed in court.

5. Track Your Business Mileage

Set up a system for tracking business‑related car mileage. Several apps use your phone's GPS to automatically generate mileage reports. If your business involves a lot of driving, this can create a substantial tax deduction.

6. Get Your Federal Tax ID Number (FEIN)

You'll need a federal tax ID number to open a business bank account. It's free and straightforward to apply online. Getting a FEIN also means you won't have to give out your Social Security number to people who need your ID to send you a Form 1099.

7. Register Your Business Name

If you plan to do business under a name that's different from your personal name, register that fictitious business name with your county clerk. You can skip this if you're forming a corporation or LLC, since those entities already have registered names.

8. Obtain Required Business Licenses

You need a business license from the city where your business is located or operates. In some cities, you'll need an additional license if you're running the business from your home. Having all required licenses is essential to protect legal rights and avoid penalties.

9. Handle Sales Tax Registration

Will you be selling products and collecting sales tax? In California, register with the California Department of Tax and Fee Administration (online only). Their website explains how much sales tax to collect and when to remit it.

If you'll have significant out‑of‑state sales (e.g., $100,000 in goods or services, or 200+ separate transactions), ask about the U.S. Supreme Court's Wayfair, Inc. ruling from June 2018, which expanded sales tax collection requirements.

10. Employee Registration and Payroll

Planning to have employees? You're registered with the IRS once you get your FEIN, but you also need to register with California's Employment Development Department (EDD). Hire a payroll company like Gusto.com to handle payroll filings. Clients referred by me get a 10% discount — ask before signing up.

Important: If you form an S corporation, the owner is considered an employee and must take a salary if the business shows a profit for the year.

Meet with a CPA

Discuss these items with an experienced CPA tax accountant:

• How will the company affect your personal tax returns?

• When are the company's tax returns due?

• How much tax will the company owe, and when must it be paid?

• If expenses exceed sales (a net operating loss), how is that handled for tax purposes?

• Any other tax questions you might have

Getting professional guidance upfront can save significant time, money, and headaches later on.