So you want to start a business. How?

I am listed on Linkedin ProFinder as a bookkeeping provider. It sent me these "leads" and their background and requests which were -- quite interesting. I think these NEW business owners need to be better educated. They need not ONE professional but A FEW. Not one-time help, but long-term, REGULAR Business Partners.

Let me explain:

First, to start a company, you need to decide on what LEGAL ENTITY your company should be. It is a DECISION you need to make, AFTER learning the pros and cons of each.

Basically there are 3 major types of Legal Entity: Sole Proprietorship, Partnership (LLC is like a partnership), and Corporation. Each has pros and cons.

To save some money, start with reading Nolo books which are self-help law books. The libraries have quite some copies.
Else, talk with a CPA who explains from TAX standpoints the pros and cons of each.

Once you have decided on the right type, hire a LAWYER to help you with legal paperwork. A lawyer is ESSENTIAL especially if you have partners or you plan to go BIG. The lawyer also handles security / capital structure, intellectual properties and partners agreement. All are serious issues.

Well, if you are a mom-and-pop shop and you plan to stay SMALL, sole-prop is the way to start, for it is the EASIEST and the CHEAPEST. And you can incorporate later.

If you plan to be BIG and want to be listed on New York Stock Exchange or NASDAQ, you want to be a CORPORATION. C Corp it is, and you issue SHARES.

In between, LLC is flexible and does not require annual directors and shareholders meetings. You do not need to write minutes or resolutions, which is -- nice! And you can do LLC-elect-to-be-taxed-as-an-S-Corp, where you are not subject to self-employment tax. (Huh?)

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Now that you have the company formed, next thing is on running the business regularly.

All businesses have THREE functions to cover: Operation, Marketing and Finance.

You probably have staff to handle the first one and two.

The third one, finance -- probably you do a lot of that to begin with.

You do:
- A/R (accounting receivable): invoice clients for work done or service delivered, process payments, keep track and follow up on outstanding invoices.
- A/P (accounts payable): track unpaid bills, pay them by due dates.
- Cash (bank or credit card): post all entries, reconcile to monthly statements provided by bank or credit card companies to ensure all is posted and is correct.
- Payroll: Payroll is complicated. So it is best to have outside payroll agent to handle. The fee is very modest. You just need to post the expenses to the books.
- Monthly reports: generate balance sheet and profit and loss to show you where you stand and how you performed.

You can do a lot of the daily bookkeeping stuff yourself, and have a bookkeeper to tie up the loose-end, correct the errors, and generate monthly reports.

And at the end of the year, have a CPA do your tax returns and year-end tax planning if needed. And if you do stock option as part of employee compensations, your CPA need to do 409A valuation, too. And you can show the valuation to your board and investors.

So, you need: a CPA, a Lawyer, and a bookkeeper.