Start-Up Playbook
December 8, 2022•5,147 words
The purpose of this guide
This is meant to be a quick-start guide to what most people consider to be the boring part of entrepreneurship... the Business Development or Bureaucratic end of things.
This guide is meant to be an easy to understand and digest (for the average person) starting point to get your business running in as both an expeditious and sound manner as possible.
If you like this or any of my other guides, please consider supporting my work. You can find all my support links in the header of this blog.
Disclaimer(s)
- I am based in Wisconsin. Everything I cover here is based on Federal regulations, as well as WI state Law and Statutes. Laws in your state may vary. In general, it is a good idea to have, at minimum, a basic understanding of the state and local laws that govern the region you plan to do business in. That being said, I will try to provide insight where applicable into this and where to acquire additional information regarding this topic. Additionally, I will be publishing "Business Startup Checklists" for as many states as possible, starting with Wisconsin, that will have direct links for specific steps in the process.
- As with the above State Law disclaimer, if you are outside the United States, the processes I outline may vary greatly. While some of the topics I discuss are universal, understand that if you are international, there may be more steps required, or less, or completely different. For example, if you do business in the EU, you are required to deal with VAT Tax, something which I have no expertise and very little knowledge in.
- Finally, being a successful entrepreneur requires you to be intellectually curious. Understand that this guide is meant to be a quick-start, playbook to get you off the ground. There are many things that you should research on your own once you have a foot in the door. I will try to point out what I believe to be the most important of these when we cross them in the guide, but the bottom line is that this is a starting point and you will need to do plenty of your own self-education. Think of this as a (and I apologize ahead of time to my international friends) Kindergarten for entrepreneurship. You have lot more work to do after reading this. Onward....
The “Sprint 0” of Entrepreneurship
I am going to make the wild assumption in thinking that you already know what you actually want to do as a business (i.e., software development, direct sales, consulting, etc...). If that is an incorrect assumption, then stop reading this now and figure that out. I have some posts on my blog that may help. This may also entail utilizing things like Innovation Development Lifecycle (IDLC) which I discuss in THIS POST, as well as setting up a Business Model Canvas which we will discuss shortly.
Come back to this guide when you have figured what it is you want to do.
*NOTE: With this, the more specific the better. i.e., instead of just saying I want to do direct sales, say I want to sell candles, CBD products, etc.... If you want to do consulting, say you want to do financial consulting, technology consulting, etc.... There are a number of reasons to get as specific as possible, but the most important reason here is that in both the registration & taxation processes, you will need to select certain business codes to file under and sometimes being too general will make filing difficult or impossible. *
So, you know what you want to do now, right? Good! Lets move on.
First thing you will need to do decide on a company structure.
In general, there are 4 major types of business entities... there are technically more, but that is outside the purview of this guide and most likely irrelevant for most (if not all) people reading this. The 4 types are; DBA (or "Doing Business As"), LLC (or "Limited Liability Company"), CORP (or Corporation) which has two major "sub-types" which we will get into in a little bit, and "Non-Profit" or Not For Profit. If you are reading this, then you will probably be ignoring Non-Profit as that requires a LOT more work, regulation and requirements and realistically is outside the purview of this guide.
NOTE: If you are interested in starting a Non-Profit, please contact me directly and I can see what I can do about consulting you in this matter.
In addition to the company structure types, you will also have to decide on a "membership structure" which is essentially, will you be a "Partnership" or "Sole Proprietorship." As a Partnership, it means that the company will have 2 or more owners and as a Sole Proprietorship the company will have no more than 1 owner (most likely you, but it could be someone else as well).
NOTE: You can always update/change the company ownership down the road if need be. Depending on what kind of company structure you choose, this may require additional steps which we will discuss below.
Now, lets break down each of the 3 "for profit" business types listed above so you can make as informed decision as possible about your company structure.
DBA's
- Positives of a DBA: Inexpensive, low compliance, low maintenance, some tax benefits.
- Negatives of a DBA: Little to no liability protection! Not as many tax benefits and perks of most businesses.
A DBA is essentially a person doing business under a different name. In general, I do not suggest this route for most people/businesses. Where it may be applicable is in certain types of businesses where there is little to no liability, or in other words, risk of getting sued.
Examples where this may be a valid solution;
For example, if you want to make videos and monetize them on a digital platform but don't want your real name publicly available or your SSN attached to your business, and depending on the content of your videos having a very low or non-existant liability, then this might be a perfectly fine solution.
If you do online surveys, user testing, or other online revenue generating things and you make above the taxable income from it, this can be a valid solution for getting tax write-offs for your operations.
Examples to consider against a DBA:
Anything you plan to create that someone would either download digital or receive physically can be a substantial liability. Consider if you make a game, video or audio file that someone must download to their personal computer to use and for whatever reason, that file corrupts or damages their operating system or hardware. Or, if you make candles, your customers house burns down and your candle is determined to be be the cause of the fire. In both of these examples, you could easily be held liable for damages as a result. Through litigation they can not only take your business assets, but because there is no liability protection, and in most DBA structures there is no separation of personal and business assets, they can also take your personal assets.
The biggest things to consider with a DBA is your liability.
LLC
- Positives of a LLC: Moderate liability protections, reasonable costs, moderate tax benefits
- Negatives of a LLC: Unlikely to have access to investment capitol, similar maintenance to a corp,
An LLC is effectively the middle of the road in the business world. Its the most common starting point for entrepreneurs and startups, as it offers the core necessities for a business and there is a clear path to upgrade to a Corp later if and when you company grows. It offers sufficient liability protections for most types of businesses and wont break the bank for filings and maintenance costs. LLC's can be both single-member and multi-member, meaning that either there is 1 owner or multiple. I would argue that most people reading this are going to fall into the LLC category.
Corporations
Remember when I said there were two types of Corporations? Well, because of that, we are going to do this section a little differently.
- Positives of a Corp: Highest liability protections, access to investment capitol, highest tax benefits and perks
- Negatives of a Corp: High cost, high compliance, high maintenance
The two main types of Corporations are an"C-Corp" & an "S-Corp"
There are lots of things that make these two types of corporations different from each other, but we are only going to focus on the most important and applicable parts, under the purview of this guide.
NOTE: I would suggest that if you file under either C-Corp or S-Corp that once you get settled, you take the time to research the nuances of your selected Corp so you fully understand its inner workings.
Before we dig into what makes an C-Corp & a S-Corp different, its important to understand what makes them the same, under the context of this guide. The biggest things that differentiates a corporation from everything else is the existence of company stock(s). Technically, there are non-stock corporations, but the truth of the matter is that they are almost exclusively used to gain tax exemptions. While they are not technically a non-profit, they are, in effect the same concept. Because of that, for the purpose of this guide, we are going to ignore the non-stock corporation. Going back to the task at hand... stocks! There are a lot of people who will see that and freak out a little. That is perfectly normal given how much the stock market is shoved down our throats in news and media, but I am going to try to put this in context so it becomes less intimidating.
First, lets define a "Stock" ... a single stock (also referred to as a "share") is, effectively, a single unit of "ownership" in a company. When (if) you file as a Corp, you will decide on how many shares, or how many stocks, you want your company to have. This is an important decision and we will get more into this in a minute. But, first, lets finish our discussion on defining a stock. So, now we know that a stock is a single unit of ownership in a company. When people talk about the Stock Market, it refers to the buying and selling of company ownership for publicly traded companies. The "publicly traded" portion of that statement is EXTREMELY important! Just because a company is a corporation and has stocks, does not mean it has to be publicly traded, and in fact, if you plan on making your company available for trade on the stock market, also known as "taking your company public" then you NEED to do independent research the inner workings on the topic stocks due to a significant amount of regulation surrounding the matter!
The general point here is that the companies stock just designates who owns what % of the company.
Both kinds of Corps also offer the highest level of liability protection available in to a US company. Essentially, a corporation is a completely separate entity (or if it makes it easier, person), with its own assets (property), rights and liabilities, separate from the owner(s) and employees.
The Ownership, or % of stocks one has in a corporation, dictates how much that persons decisions affect the company. In other words, when you file as a corporation, you must dictate who the "Officers" & "Owners" (we will define "Officers" and "Owners" later, under the filing section of this guide) of the company are and how much of the % of allocated stocks each person owns. Legally, someone who owns 51% of the shares of a company has final say in any decisions made about the company. If a dispute regarding this would go to court, the courts would side with the person who holds majority shares. This also works for publicly traded companies, which is why if you are going to take your company public, you NEED to understand this at a very deep level. As an example, lets say that I was lucky enough to own majority shares in Google: If, in a board meeting they said they were going to begin work on a brand new device that lets us read users minds and I say "no" then, by law, they would have to shelve end the project. Owner has final say and this is probably the most important takeaway regarding Corporate Stocks that you should remember.
You should now have a general idea as to what your company structure and membership structure should be now. Mark that down and set it aside for later...
Mission/Vision
Next we are going to decide on a Mission or Vision Statement for your company. While on the surface may seem silly, I assure you it is not. Having a Mission or Vision Statement is invaluable in the longevity of your company and ensuring its long-term success. When you run into difficult decisions, you have your statement to fall back on. Is the decision you need to make in line with what your vision for your company is? Take a little bit of time to consider your Statement and write it down. It can be a paragraph or two, it can be a bullet-point list or it can be just an elevator pitch. The point is that you want something that succulent describes your company and its reason for being.
Making a Canvas
There are competing ideologies within the business world for what the "right" way to do a canvas is. In general, they boil down to two main approaches: The Business Model Canvas (BMC) or the Lean Canvas (LC). To be 100% honest, both have merit. Both also have some things that are arguably erroneous for most startups. One of my previous business partners and I worked on, what we called, a Lean Business Model Canvas (LBMC) where we stripped away all the excess stuff that was generally not useful and combined the good stuff from both. You can find a link to download the template for the LBMC in Appendix B of this guide.
How you use the canvas is go through each category and add as many bullet points as are applicable to you, your business and/or product(s)/service(s) as possible. Like your Mission/Vision Statement, your canvas will allow you to make better, more objective business decisions over the long haul of your company. It will also allow you to display value to potential investors if you decide to go that route.
Working Agreements, handbooks and rules, oh my...
Depending on what your company and membership structures are, this section may or may not apply.
If you are building a partnership of any kind, then you should absolutely NOT ignore this section.
Laying out a detailed rules for your partners, employees and, of course, you, will save you countless headaches down the road. One of the largest failures I have seen in startups is a failure to dictate rules and expectations. This can be solved by having a simple working agreement or an actual company handbook that lays out everything. I personally prefer the latter, as I like to provide a one-stop-shop for people so they are not trying to hunt down specific pieces of information. Having said that, if you are going to go the handbook route, make sure it is also succinct and to the point enough that people will actually read it. In other words, DO NOT write a novel.
The following are some of the core topics you will want to cover in your handbook;
- Compensation Pre & Post Revenue
- How are you compensating your people prior to having actual revenue. Company stock? Revenue sharing agreement? There are lots of options here and you will have to choose the best solution for you, your company and your team.
- After you receive revenue, how is payment going to look? Will your team be employees, contractors or something else? Will employees have a salary or be hourly? Having these things outlined gives your team something to look forward to and, if done right, will encourage them to work harder to hit that goal.
- Open Door/Closed Door Policy
- Will you be fully open and transparent with your partners? What about with your non-owner team members? What about with the public? (NOTE: If you are a publicly traded company, you do not have a choice with this one)
- Team Structure
- What are the roles of each team member? Are there specializations? What is the team structure and hierarchy and is that available to all team members?
- Company Culture
- What is the culture of the company you are trying to build? This should refer back to your Mission/Vision Statement and should be clearly articulated to your team members. For example, someone going into law with the sole purpose of making a shit-ton of cash would probably not fit into a law firm who's culture is about healing the planet via environmental law.
Registration & Responsible Due Diligence
Protection / Trademarking / Copywriting
In the world of business, nothing is more valuable than your Intellectual Property (IP). Your IP includes your company name! Imagine if Google did not trademark the name "Google" ... pretty crazy, right? That being said, in general, you will want to have legal representation for your company to handle complex legal issues, document execution, etc... I have some suggestions in THIS POST on my blog for how to do this either on the cheap or for free, but its important to make sure that your legal representation specializes in the area of business you are operating in. For example, if you are making games, you want a lawyer who specializes in IP Law, specifically.
All that being said, this is the one time I am going to suggest not using a lawyer and just doing it yourself. Trademarking/Copywriting your company name and logo is probably the easiest of process and I believe that it is good for any entrepreneur to, at minimum, have a basic understanding of all operations that may happen in the business.
First, head over to the USTPO (United States Patent and Trademark Office) Website. USTPO has a handy tool for searching existing Trademarks which can be found HERE. When you click on the "Search our trademark database (TESS)" button you will be greeted with 3 primary search options:
Basic Word Mark Search, Word and/or Design Mark Search & Word and/or Design Mark Search. In most cases, at this stage, you will be using the first option "Basic Word Mark Search" so click on that. Type in the name of the company you desire for your company and if nothing comes up, great news, you can move forward to the next step. If, however, a result does come up, then you will need to consider a different name before registering your company with the state.
State registration
Every state has a system for registering a business. In the State of WI, it is known as WDFI (Wisconsin Department of Financial Institutions), and in most cases, can be done online through a website. I will try to update this handbook with the links for all 50 states in Appendix A of this guide over time. The process is typically fairly simple and in most cases, the website will walk you through, step-by-step what you need to submit and how to actually submit it. You should receive an email confirmation relatively soon after you complete the process, and you should receive your final filing documents, in most cases, within 10 business days.
NOTE: Something to consider during this step, the address you use as your "Registered Agent" address will become public information, associated with your business. I will go into more detail with this under the "Office Space" section, but if you plan on working from home and do not want your home address to be publicly associated with your business, I would suggest using A P.O. Box. Again, I go into more detail with this in the aforementioned section below, but its important to note this now so your home address is not compromised.
Taxation
Now we get to the portion of the business ownership that most people hate to deal with... the tax man!
First things first, we will need to register for an Employer Identification Number (EIN). Your EIN is essentially the Social Security Number for your business. Without it, your business cannot legally receive money for products or services rendered... and, well, that's kind of the point of a business, inst it? The Internal Revenue Service (IRS) has a straightforward online process for this, so head HERE and click on the button that says "Apply for an EIN Online" and follow the steps for the application process. This too, is a fairly hand-holdy process, so you should not have any issues completing the application if you have completed all of the preceding steps in this guide. The IRS will send you your EIN once your application has been approved.
It will be your responsibility as a business owner to ensure you are complying with tax laws and payments and failure to do so can land you in serious legal jeopardy.
Separation of assets
In general, even if you are not a corporation, it is a good idea to keep as many company specific assets separate from personal assets as possible, it both reduces confusion and friction between personal and processional and it looks far more professional than . To this end, I would suggest the following, at minimum;
Have a domain-based email (e.g., Contact@MyCompany.com). Google makes this easy to setup and relatively cost effective. Head over to Google Domains and search for your desired domain. If it is available, register it. For a .com domain, this should cost roughly $12/year. Once you have purchased that, your domains page and click on the "My Domains" section (if it is not already selected) and you should see a list of all the domains you own. Click on the domain you want to add the email service to and with that domain selected, click on "Email" to bring up the options for Google Workspace. Then it is a simple process of adding Google Workspace services to the domain and Google takes care of the rest. Adding and removing people to the service is easy, so growing the email footprint of the company is easy too. Google Workspace costs $8/month/user at the time of writing this for the cheapest package.
I would also suggest having a dedicated phone # for your company. The best options I have found for small businesses and startups are Grasshopper and Vonage Business Unified Communication. Both are feature-rich at the lowest of price tiers and both of them can grow with features as your business grows.
Additionally, I am also a firm believer that, even if you are a sole proprietorship and DBA, that having separate banking from your personal accounts is really critical. Most mainstream banks offer checking accounts for small businesses, with little to no requirements, so I would highly suggest taking advantage of one of those.
Office Space
Even before COVID changed the way we work (I argue forever), entrepreneurs were working from home for decades prior. You have to make a decisions as to how and where you will build an office. In general there are really 3 main options, Physical, Digital or hybrid. The type of business you build may dictate this requirement to a certain degree (i.e., you will probably not be running a manufacturing business out of your home), but we are going to assume you have a choice here.
Lets break down each of the three;
Physical Location
A physical location is also sometimes referred to as a brick-and-morter location. It is what you walk into when you go to something like a Best Buy. One of the biggest things to consider with a physical location is cost. 99.9% of the time, you will have to pay rent and sometimes utilities as well, but there are other costs that are associated with renting a physical location that most first-time entrepreneurs dont consider. For example, did you know that in most states, you MUST hold a general liability insurance policy to have a physical office? Depending on your state and your office landlord, you may also be on the hook for things like inspection costs and repair costs. You will also have to follow the rules of the property management company, sometimes these can be very arbitrary and intrusive, sometimes not. Bottom line is physical locations come with strings, and as COVID has proven, the productivity benefits that were touted in favor of centralized workplaces for decades have been proven to be largely false.
Having said that, there may be legitimate reasons to have a physical location as well. For example, if you are starting a candle business and you have a dog at home, you may want a physical location to keep your dogs fur out of your candles. As I stated above, your business may have unique needs to you that may dictate the necessity for a physical location.
Digital Location
A digital location is just another word for remote work. This can be working from home, from a hotel, pretty much anywhere in the world. This offers you the freedom to do work on your terms and can cut a lot of costs associated with a physical location.
The tradeoff of this is this may require a larger investment in your digital infrastructure to allow you to work remotely. In general though, this is a significantly lower cost for operations than the other two options.
Even if you work from home, it is important to have a dedicated area for your office. For one, this will allow you to justify your tax deductions and if ever audited, prove your justification for that deduction, but more importantly, it puts you in the right mental frame to get up each day and "go to your office" to work. There have been studies done on working from home that definitively show that even just having a dedicated desk in your house where you work from, increases productivity.
Hybrid Work
As a startup, if you choose the hybrid option, that is probably going to entail having a "Co-Work" physical location and supplementing your time there with working digitally. In general, Co-Working spaces are less expensive then a dedicated office and sometimes do not require General Liability Insurance, but these are things you would have to validate at the location you are considering.
99 Problems, but a buck ain't 1
Accounting Procedures & Software
Accounts Receivable (AR) & Accounts Payable (AP) are a major lifeblood of any company. AR is essentially just money you receive and AP is essentially just money you spend. Tracking AR/AP is going to be essential to the longevity and success of your company.
Because of this, I HIGHLY suggest using accounting software. Its going to make A LOT of your business development (BizDev) exponentially easier. There are lots of accounting services out there, like QuickBooks and FreshBooks, but, hands down, I suggest using Wave Accounting, especially for a startup. Wave is free for ALL core accounting functions, with paid additions for things like payroll and CC/ACH processing (which, spoiler alert, all the subscription only accounting software like QuickBooks, charges additional for anyway). Wave is also easy to use for non-accountants and accountants alike.
Using accounting software also helps you keep in compliance with things like taxes, so its an essential tool for any business owner.
Remember, most AP's are going to be eligible for a tax reduction, in other words, if you spend money on the business, that decreases what you owe in taxes. Using accounting software will organize and keep track of this for when you need to file.
Monetization
As discussed above, AR's are a critical component of any business.
By now, you should have your registered business, canvas, EIN and a general idea of what you are going to be doing to have AR's. Whether you are selling a product, service or something else, monetizing your company deliverable(s) correctly is essential. Proper monetization practices are very dependent on hundreds of factors, and in some cases, trial and error, and as such are outside the purview of this guide, but in general you will want to do market research into analogous products/services and then use that as a baseline for your deliverable, accounting for your costs.
I have posts on my blog that dive deeper into this concept.
Exit Strategy
The ultimate goal of any business is success. What will your business look like 5 years down the road, what about 10? Having an exit strategy from day 1 is important. What does success look like? What about failure? The truth is that as a business owner, you WILL have failures! That is unavoidable. Getting back up, brushing yourself off and learning from those failures is critical to long-term success! You need to have a hard point of when its time to walk away, and if you hit that point, actually follow-through. Likewise, you need to decide whether or not you are willing to be bought out. Lets say you make the next hot app, if Microsoft comes to you and makes you an offer for acquisition, what is the $ amount you are willing to part with your company for?
Having a written and codified exit strategy for both success and failure is an important final step.
Appendix A: State Registration Links
Wisconsin: WDFI (Wisconsin Department of Financial Institutions)
Appendix B: Resource Downloads
Lean Business Model Canvas (LBMC) Template
Appendix C: Business Startup Checklist
- [ ] Identify your business idea.
- [ ] Create a business plan.
- [ ] Codify your Mission/Vision Statement
- [ ] Make a Canvas
- [ ] Codify a company culture
- [ ] Trademark your company name and logo
- [ ] Decide your company structure
- [ ] Write a company handbook or comparative document
- [ ] Register your business with the your State
- [ ] Apply for an EIN
- [ ] Create a business bank account.
- [ ] Setup your accounting software
- [ ] Setup your company phone # and Email
- [ ] Create a monetization strategy
- [ ] Choose an office space setup
- [ ] Setup any additional tech
- [ ] Codify an Exit Strategy