Have you been considering pulling the trigger on that million-dollar business idea?

You’ve got a killer product and genius marketing plan.

But what about the finances, legal, and tax stuff?

LLC’s, Partnerships, DBA’s, S Corp...ahhh!!

The sad truth is, too many people put off implementing a good idea in the proper way because they’re intimidated.

But fear not -- we’ve got you covered.

And it’s probably not as complicated or as costly as you might think.

So let’s get our Business Building Blocks out and see what goes into building a business the right way.

The first step is to put on your CFO hat and get to work setting up your finances correctly.

Do you need to set up a business bank account?

Or is a personal checking okay if you’re just starting out?

Experts agree that the most important thing is to separate your business money from your personal money.

Completely.

No leaks!

It will help you avoid bookkeeping and tax headaches before they start.

And when you’re just starting out, using a separate personal checking account can be fine, but eventually, upgrading to a BUSINESS checking account can offer special benefits -- like additional protection of your personal assets if things go south.

All your initial set up costs like a website or logo-design should come from this account and not your personal one.

It will also eventually be the destination for income once those benjamins start rolling in.

Now it’s time to decide on a legal structure.

If your business is on the smaller side, you’ve got some simpler options, like the Sole Proprietorship.

A “sole proprietor” business has one owner, you, and is not a separate entity under the law.

If this is your choice, you won’t have to file anything with the government to get started But you may be personally held responsible for any debts the business might incur.

And come tax time, all the profit or loss from that business will run through your personal tax return.

You can operate the business under your own personal name, or you can choose to use a DBA or “doing business as”.

For instance, when I had a professional organizing business, I wanted my clients to be able to make checks out to “Swiss Miss Organizing,” rather than my name.

It just felt more professional.

But before I could get a business account called “Swiss Miss Organizing,” I had to file a DBA for that name.

This is done at the county level, and most counties allow for a pretty easy online filing process.

There will most likely be filing fees, but it’s usually under a hundred bucks.

If you decide to share ownership of a business with at least one other person, then you’ll need to form a partnership.

It might be worth it to hire a small business attorney to help you draft up an agreement.

The money you spend will be WELL worth it to have clarity of ownership and operating agreements.

Small business partnerships implode all the time due to vague or non-existant contracting.

Partnerships require not only a DBA but also an Electronic Identification Number, easily obtained from the IRS website.

This acts like a social security number for your business and will allow you to file a tax return for the business itself.

BUT the business doesn’t pay income tax.

Instead, it "passes through" any profits or losses to its partners, meaning the partners are personally on the hook for any taxes… or legal troubles.

If that sounds scary, you might want to consider a Limited Liability Company.

The LLC shields the partners from most legal responsibility and protects their personal assets should a client sue the business for some reason.

Putting an LLC in place can cost a few hundred to a few thousand dollars, depending on your state and whether you hire a professional to help you.

That can increase the cost a bit, but it’s better than finding out too late that you’re not protected because it was improperly set up.

Keep in mind that the advantages here are for legal protection only.

LLC’s don’t change how the partners are taxed.

For that, you need to go one more step up: a corporation.

The most common type for small business owners is the Subchapter S-Corporation.

Unlike all the other arrangements we’ve talked about, an S-Corp is considered by the government to be its own discrete entity, both for legal AND tax-related purposes.

Instead of just absorbing the profits (or losses), your business now PAYS YOU as an employee and/or owner.

And because this income is taxed at a different rate, it can mean some real savings.

But there are costs associated with filing for an S-Corp, and they can get pretty hefty.

There’s filing charges, an additional tax return you’ll have to get prepared, and likely ongoing charges for a payroll service.

It all may be worth it for the tax saving you get… or not.

To know for sure, you should speak with a tax specialist… which brings us to our final building block!

Get some experts in your corner.

Any small business owner will tell you that when it comes to laws and taxes, one simple mistake can lead to massive headaches down the road.

Selecting the right business entity is just one of the many critical decisions they can help you with.

When you’re just starting out, we really recommend building a relationship with a good CPA, bookkeeper, and small business attorney.

It’s their job to help you make smart decisions… while still playing by the rules.

Building a small business might feel daunting at first.

But if you take your time, do your research, and set things up right from day one, you’ll be reaching your dreams before you know it.

And that’s our two cents!