Before you get too deeply into establishing your firm, you will need to surround yourself with business professionals who have seen all this before. Putting time and research into the process of selecting these professionals can lead to trusting business relationships that will last for years.
Web design firms can count on needing at least an accountant, an attorney and a bank. Corporations will also need a registered agent if they are incorporating outside the state where the business is conducted.
Some portions are repeated between professionals since the processes of selecting them are similar.
Your accountant is perhaps your most important business advisor. Follow these steps to help you select one that fits your situation:
- Determine what functions you need an accountant to perform. If you have a solid background in accounting, you may not need an accountant to perform every financial task. Basic items like keeping records and receipts, writing checks, paying bills, and balancing bank statements can be handled with minimal effort. You just need to make sure you have the time. Getting behind on any of those tasks can turn into an expensive mistake down the road. More complicated tasks such as tax preparation, auditing of financial statements, and financial needs planning require a professional accountant.
- Determine what is important to you in an accountant. Do you need an accountant that will walk you through and explain all of the processes he is involved in? If you are relatively new to accounting, you need an accountant to also be a teacher, at least for a little while. A good accountant will inform you of things you need that you don’t already know about.
If you are often on the road or otherwise occupied, you’ll need an accountant that can come to your office at your convenience. Though this sounds like something one would take for granted, not all accounting firms come to you.
Is accounting all you need? Many larger accounting firms offer full services in risk management, technology consulting, and many other business services in addition to being audit and tax gurus. If you choose a smaller firm, make sure they are able to recommend qualified professionals for additional services if the need arises.
Larger firms will generally have staff people performing the actual work for you. The partner you speak to will probably only review the end result. If personal contact with the person doing your work matters to you, stick with a small firm.
Of course, price is always a factor. Though most accountants charge about the same hourly fees, you can probably find a smaller firm that will cut a break to a new business. The hope is that as your firm grows, you will retain them as your accountant and they can start charging you more.
- Create a short list. You need to start somewhere, so start asking people you know in similar businesses who they use or recommend. Ask friends, family, or anyone else you trust if they have any wisdom to convey on the subject. Once you have a list, you need to narrow it down to the top three or four. Call the firms on the long list and ask someone qualified a couple simple questions to see if they are at all compatible. The long list can be trimmed down in these ways:
- Is the firm taking on new clients? If not, that’s an easy elimination.
- Do they have experience in your industry? Many accountants specialize in a particular kind of business. If your list contains a firm who only has utilities clients (for example), you may want to pass on them.
- How long has the firm been around? How many employees does the firm have? If there is a chance that the only partner in the firm will pack up shop and go to work for a Big 5 firm, steer clear. Continuity is very important.. you want a firm that will be with you for years.
- How high-tech is their office? If they have computers and e-mail, it’s a good sign that they speak the same language as you. Also, these days, a low-tech office runs less efficiently than a high-tech office and may end up costing you more in chargeable hours.
- Conduct interviews. Once you have your short list, conduct interviews with a partner from each firm on the list. If they have gotten this far with you, chances are they are qualified to handle your account. The main thing you are looking for in the interview is the feeling you get about the person you are interviewing.
- Did he/she show up on time?
- How comfortable do they make you feel? Your relationship with your accountant is similar to your relationship with your doctor. They are going to know some very personal things about your private affairs. An accountant that does not put you at ease is one to stay away from.
- Is a representative from their firm available during off hours? Especially in the web design industry, business is conducted all the time. If you need quick advice, someone should be able to take your call.
- When you speak about your business, do they ask educated questions? Do they make informed comments? An accountant who nods knowingly but doesn’t contribute anything to the conversation is giving you a hose job and is not interested in the health of your firm.
You will seek the advice of your accountant for all of your firm’s financial matters. It is an enormous responsibility, and needs to be given to someone who takes your business seriously.
One of the first things we said about choosing an accountant is that you should determine what functions you can perform yourself. Bookkeeping could be performed internally with an appropriately qualified staff. Audits should be conducted and taxes should be prepared by a qualified accountant. With regard to legal matters, there are very few (if any) situations that you should handle personally. The difference is that most accounting errors can be corrected in a future reporting period. Legal errors last much longer.
You can get lost in the many different kinds of skills attorneys can specialize in. Most web design firms are looking for a good general business attorney. These attorneys typically assist companies seeking legal representation on matters involving corporation structure, corporate formation, compliance matters and day to day operations. They also provide assistance in drafting and negotiating contracts and agreements, including buy/sell agreements, non-compete agreements and merger and acquisition assistance. Most attorneys also provide litigation representation when necessary. In certain special cases, one of these attorneys may seek the aid of a specialist in a particular field including intellectual property, corporations and partnerships, or technology.
The steps to choosing an attorney are essentially the same as those for choosing an accountant. Determine what services you need from your attorney and what other qualities are important to you. Make your short list and conduct interviews.
Choosing which financial institution to use for your firm is easier than choosing an accountant or attorney. Most financial institutions offer the same basic services, so deciding which one to use almost always comes down to convenience and price. Here are some things to think about when shopping around:
- You won’t be able to use a credit union since most businesses don’t qualify for their membership. They wouldn’t be the best choice anyway since they don’t offer business-specific services.
- Avoid brokerage firms for your business account. The interest they pay is not worth the risk of not being FDIC insured.
- The density of ATMs in your area should not be a concern. You should never need to use cash in your business. Unless you are a sole proprietorship, avoid mixing your personal money with your business money. It clouds the distinction between the business and the person and jeopardizes the liability protection enjoyed by firms that structure themselves appropriately. The biggest benefit of an ATM for a business account is to make after-hours deposits, but banks usually have a night drop for such circumstances.
- There should also be no need for a debit card (a.k.a., “check card”). You should obtain an actual credit or charge card and float your purchases for the time they allot. Why part with your money sooner than necessary?
- Being in the business that you’re in, wouldn’t it be nice to have a bank that had full service on-line banking? Keep it in mind when shopping around.
- 100% Internet banks are nice because they generally have the most sophisticated on-line interface. One problem is that most of them don’t accept business accounts. There’s also a certain satisfaction in knowing of a physical building you can go to when you have a problem regarding your money. Internet banks don’t have this luxury. Be careful.
- It’s good to have the name of a human in a local branch you can call on when you have a question. Smaller, community banks have MUCH better customer service for walk-ins than large national banks. You can call some smaller banks and get a human right off the bat! Walk into a local branch a pick out a customer service person who has been around a while. Get to know your banker personally and it will pay off big time when it comes time for that small business loan or special favor.
- The other side of the coin is that many banks have turned to the model of no-human interaction. They charge fees for doing business with a teller when you could have used an ATM, computer, or telephone. Study the schedule of fees for each bank you investigate.
- Many banks offer free checking services and other perks for keeping a minimum balance in your account at all times (usually around $1,000). Minimum balances for free services is a good deal for a business account. You shouldn’t allow your business account to get below a certain level, just on principle. You might as well be given something for it.
Most importantly, you have to feel that your money is safe. And we’re not talking about safe from Tombstone-era bank robbers. As long as your bank is FDIC insured, you’ll get your money even if the bank goes out of business. We’re talking about feeling that you money is safe from the bank itself.
Banks have been known to charge customers for services they didn’t receive, engage is questionable check-cashing procedures, and change the terms of accounts with as little notification as possible. Keeping your money in the bank is still safer than keeping it under your mattress, but remember THEY HAVE YOUR MONEY! Know who is watching it for you.
A registered agent is an entity that represents your firm in a state where it is incorporated or conducting business. Most small web design firms won’t have the need for a registered agent since the state where they are located is the same state where they are incorporated. If this is the case, the firm is its own registered agent. Still, some firms choose to incorporate in other states because of perceived tax or litigation benefits.
Several companies offer registered agent services in all 50 states. Such services should, at a MINIMUM, forward all mail or notices received for your firm to you priority overnight. You see, if your firm is receiving mail at your registered agent’s address instead of your common business address, chances are it is of a legal nature. Subpoenas are a good example of an official communication that would be received by your registered agent. In addition to mail forwarding, registered agents can keep you updated on state business regulations, provide state tax and compliance forms, and provide corporate secretarial services. Some firms use registered agents as an actual office where clients can drop off materials or sign contracts. While some registered agent companies do provide this service, it may look unprofessional to clients who cannot talk to anyone at that office specifically about their project. Especially when the office has a different name than your firm’s!
If you incorporate your firm in one state, then move to another, you may not want to re-incorporate in your new state. If this is the case, you will need a registered agent in your old state. It is perfectly legitimate to ask a friend or relative to assume this responsibility, but make sure it is someone who will forward official communications to you when they receive them. If it’s not someone you can absolutely count on, pay for the pros to do it.
Next time we’ll talk about forming a business entity and which one is right for you.