My job is to clear roadblocks to revenue. I want you bringing in revenue as quickly as possible. Let’s be clear, I work for the money and I think you should too. If I didn’t need the money, I would be busy, but I would be doing something different. The great thing about consulting is that you and I can be sitting here today having a chat, and tomorrow you could be working billable hours. All it takes is landing a project. Sure, there are many steps involved in building a sustainable business but for now, it’s all about generating revenue.
When I was a W-2 employee, I used to hear comments about 1099s and self-employment taxes. But I never really knew what those terms meant. And although I had a few friends who did consulting, I had no idea what was required to set up the business side of a consulting business. I had plenty of corporate experience, but I didn’t know whether this business stuff was a big mountain or a little hill. I’m here to tell you right now that it’s a little hill. In California, the only thing you need to get started is a business license. Everything else can be taken care of once you have your first check in your hand. Or even further down the road at the appropriate time.
In California, you can purchase your business license, sometimes call a business tax certificate, from your city. It’s usually easy to do online and costs about $60. The easiest way to get started is to file as a sole-proprietor and use your own name. The U.S. Small Business Administration web site has links to what is required in your state – State Licenses & Permits (https://www.sba.gov/starting-business/business-licenses-permits/state-licenses-permits?leavingSBA=https://www.mssbdc.org/resources/faqs#blicense). This is the only thing you must have before you take your first check.
If you do business in any name other than your own, you must file a fictitious business name statement or DBA (doing business as). “Rasdal Associates” requires a fictitious business name statement but “Amy Rasdal” does not. You can easily start with your own name and create a business name later.
Employer Tax ID Number
If you prefer not to give your clients your personal social security number for privacy reasons, you can get an employer tax ID number. You can apply here https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online you usually get it immediately and there is no cost. All that from the government no less!
Business Bank Account
If your clients make your checks out to your name, you don’t need a business bank account to get started. So, you’re good to go for now. Eventually you may name your business and then you will need a business bank account. I can’t deposit a check made out to Billable at the Beach® in my Amy Rasdal bank account so I need a business account. In order to open your business bank account, you will need the items mentioned above: business license, a fictitious business name statement or DBA and employer tax ID number.
I do my own invoicing since I don’t send many each month. It’s kind of fun to invoice when the money is coming directly to you. I often have a late-night, private party on the last day of the month to celebrate my successes and send out my invoices. If you send then promptly, you will get paid faster. I use a simple excel template and send the invoice as a PDF. You can create your own or search on “invoice template” and you’ll get plenty of ideas and downloads.
When you have your own business, you must pay what are called estimated or quarterly taxes. When you are a W-2 employee, taxes are withheld from your check. But your clients will write your check for the full amount of your invoice. These estimated taxes are similar to the tax withholding. If you don’t pay the estimated taxes, no one is going to come to your house, put you in handcuffs and haul you away. You simply pay a small penalty on your taxes. Some self-employed people never pay estimated taxes and always pay the penalty. Since my job is clearing roadblocks to revenue, don’t worry about taxes right now. Go out and win the business. However, don’t spend all of the money because you will owe some of it in taxes. At the end of the year and/or when your business really gets rolling, hire a professional to handle your taxes. I have a tax strategist and she saves me $30,000 – $50,000 a year.
You can get started as a sole proprietor and don’t need to worry about incorporating right off the bat. Eventually you will want to think more about it. There are tremendous tax advantages to being incorporated. My company is incorporated as an S Corporation but I didn’t do this until I had a couple of years under my belt. Once you get to an annual run rate of $60,000 – $80,000, it’s time to start considering incorporating. Until then, stay on your track to generate revenue.
Take Control and Take the plunge!
The best way to get started as a consultant is to dive in. This free email course will walk you through three action steps to generate revenue now. If you start right away, you can be doing billable work as soon as next week. Following these three action steps gives you the best possible chance of landing a consulting project. It works for me and I see it work for others, over and over again.