Posts

Did You Work for a Bad Boss?

This winter, my body has decided that it would pick up every cold going around.  Being sick sucks for anyone, but being sick when you’re an entrepreneur is especially stressful.  There is no one to carry the torch when you’re ‘out of the office’, and often you just have to push through.

There are a lot of reasons to start a business.  The best reasons usually involve a level of passion and expertise which carry us through the hard times (like having a cold).  But so many of us started our own business because we had a bad boss.  We felt a lack of empowerment, misdirection, overcomplication of our jobs, lack of acknowledgement, and sometimes were penalized for not being ‘yes men’.  Are you nodding yet?  You’re definitely not alone, and your reasoning isn’t wrong.  However, it’s important to jump in with eyes wide open.

My Entrepreneur Story

My first business, a nonprofit organization, was started for the first reason — passion.  I wanted to help people serve my community.  My second business, a web company still running today, was started as a reaction to a bad boss.

Honestly, I didn’t know what else to do.  I watched a talented young man with little business savvy hire 16 contractors, then fire them two months later due to ‘budget cuts’.  One week we were buying Dom Perignon to celebrate landing a six-figure client, the next he was raging around the office because Google had once again changed the algorithms on which his business was built.

Finally, he realized he was better suited to do the job and not run a business (a lucrative offer came through from a larger company which helped).  He sold the company to our main client — someone I had had to teach to use Facebook three times.  Needless to say, he was ill-equipped to buy a web company.

At that time I was Director of Content Marketing.  It fell to me to train my new boss and, for a while, he listened.  Sooner than later, he started pushing his own ideas through, as was his prerogative.  But I knew they weren’t right for that type of company or my employees.  I saw the writing on the wall, started designing websites on the side, and had a small portfolio ready the day I was laid off.

What I Did Right

There was a lot I did during the ‘building’ process that allowed me to launch my business the moment I needed to.  I took a few classes at a local entrepreneur organization and had an idea of what it took to run a for-profit business.  I started doing the work I planned to do way before I needed to, and had a legitimate portfolio ready when the time came.  With that portfolio and experience came a client list that I could lean on for referrals.

What I Did Wrong

I’ve had a lot of time to reflect on the things I wish I’d done.  There are days when the list is really long (bad days), but most of my mistakes were built on ignorance, not actual wrong-doing or inadequacy.  I didn’t know how to reach out to peers, how to find a mentor, and how to build systems for growth, to name a few.

The biggest mistake I made was starting a web company because that’s the industry I had been in for two years.  I more or less took the myriad of work that was involved during my time with my former employer and repackaged it to fit what I saw as the industry opportunity.

There was no passion involved.

I’m good at web design.  I enjoy working with clients to help support their endeavors.  My background in Anthropology makes developing a website that communicates well with the end user a breeze.  Being a visual thinker, design was a pleasant change from the cold math of SEO.

But it was a strategic move — not a passionate one.

Passion is what gets us out of bed in the morning.  It keeps our engines running when we’re exhausted.  The nonprofit sector sees this every day.  Despite having petit budgets, a bootstrapped team, and competitive resources, nonprofits find their staff working 40+ hours / week easily.  The board of my nonprofit was comprised of extremely busy people, but they all gladly made time for a cause they believed in.

Stop & Think

If you’re considering starting a business, stop and think for a moment.  Consider your WHY.  What draws you to entrepreneurship?  I’ve heard the following from many of my clients:

  • I had a bad boss and I never want to work for someone again.
  • I don’t want anyone to control my livelihood.
  • I’ve been doing it for years and know I could do it better.

These are all legitimate reasons, but if there is nothing further from this, you’re going to burn out.  There must be something more to it.  “I’ve been doing it for years — and it would be my dream job — but I know I can do it better.”  There’s a big difference, there.  Four years down the road, when you’re going through a dry spell or need to make a difficult transition, that difference will mean everything.

How To Incorporate a Business

The first and most important step to starting a business is filing papers with your State, the IRS, and opening a bank account to ensure your financial security (we don’t like to think about a threat like bankruptcy or being sued when just starting out, but separate accounts are a necessary precaution).

As someone who has been through this process many times, I can say this is the easiest part of starting a business.  Yet in talking to mentees and co-mentors, I realized that if you don’t know how to take these steps, it may seem daunting to get involved in legal forms.  So I made this guide.

Step One:  File Articles of Incorporation

This is the part in which it would be good to talk to a lawyer and / or CPA.  I have completed this stage with and without the advice of a lawyer, but it’s helpful to know some things before you start.

The most important decision here is whether or not you want to incorporate as an LLC, S-Corp, C-Corp, or B-Corp.  This step also has the option of filing as a nonprofit corporation should you so choose.  I personally filed for an S-Corp because I knew the structure of my business would take advantage of its taxation structure.  If you’re planning to include altruism in your company, a B-Corp may be appropriate.  I can’t advise you on this since it’s a legal matter, but you can probably find a free resource in your city that will help (in Michigan, the SBDC and Michigan Women’s Foundation are good options).

A lawyer will also help you decide if you want to include a board of directors.  Regardless, the incorporation papers provided by your state are ‘fill in the blank’ style and easy to follow.  Michigan’s fee is $60 for filing a for-profit corporation, and you can expect to receive a validated copy in approximately one month.

Step Two:  Get Your EIN Number from the IRS

This also sounds daunting, but it’s even easier than filing your state papers!  Plus, it’s free.

Once you receive your incorporation papers back from the state, you’ll need an EIN Number from the IRS to do pretty much anything.  You can’t open a bank account without, nor can you take online payments or file taxes.  Even nonprofit corporations need an EIN, so don’t skip this step!

With your incorporation papers in front of you, head to the IRS website and begin the process of applying for an EIN Number.  The site will walk you through a series of questions you will need to answer, including your business state ID (should be at the top of your state papers).  You will receive a PDF to download at the end of the process that officially states your EIN Number and IRS status.  Print this immediately and save the file.  The IRS will also mail you a copy, but that takes a while and multiple copies is always safer.

Step Three:  Open A Bank Account

So why was I talking about bankruptcy and suing at the beginning of the article?  There’s a business best practice called “piercing the veil”.  Essentially, by keeping your personal finances and business finances separate, you not only make things easier on your CPA (which is good because s/he’ll bill you hourly) but keep your personal savings and assets safe from any business mishap.  I say this not to scare you but to start you on the right foot.  If you spoke with a lawyer at Step One, you may have been told this already.

You’ll want a bank account for other reasons, too.  It makes tracking your business’ progress much easier since it’s not mixed with anything else.  It also makes business purchases more clear and easy for tax write offs.  Finally, it makes you look official, so when someone writes you a cheque or pays you online, they get a transaction notification and receipt from your business, not you.

With your State Papers and your EIN Number documentation, go to the bank of your choice.  I find it easiest to use the same bank for everything.  It’s one number to call, one system to memorize, and some banks charge you for digital transfers outside their system.  When at your bank, wait to sit down with an official, not a teller.  They’ll walk you through the paperwork and get you set up.

One last note, here.  Please oh please do not buy personal items from the business account, or vice versa.  This would ‘pierce the veil’ and blur the lines for any legal action.  Bad.  Instead, pay yourself by making a bank transfer from the business account to your personal account and annotate the transfer as income or owner pay.  Talk to a CPA to get even more advice about this (I’m not able to provide more because I’m not legally certified and can only tell you from my personal experience).

That’s it!  If something’s missing, please let me know in the comments below so I can help.