Frequently Asked Accounting Questions

1. How should I structure my small business?

One of the first decisions you’ll make when starting up is your business structure. The structure you choose impacts taxes, liability, control, and how to pay yourself from your business.

You can structure your business as a: 

  • Sole Proprietor
  • Partnership
  • Limited liability company (LLC)
  • Corporation (C Corp or S Corp)

Some business structures are more complicated to manage than others. Depending on how you structure your company, you may have significant filing and reporting requirements.

Before selecting a business entity, lay out your business goals and consider the pros and cons of each.

2. Do I need a separate business bank account?

Not all businesses are required to open a separate business account. But that doesn’t mean you shouldn’t do it regardless.

Mixing personal and business funds can cause you to file taxes inaccurately, become disorganized, and overspend. You may accidentally use business funds to make personal purchases if you combine funds.

Convinced? To open a business bank account, you must:

  • Choose a bank
  • Gather necessary documents (e.g., articles of incorporation)
  • Open the account

3. How do I finance my business?

Not every aspiring entrepreneur can afford to bootstrap their business. You may need to think about financing options if you want your small business dream to come to life.

If you’re interested in borrowing funds (which may require collateral), you can apply for a:

  • Business line of credit
  • Business loan
  • Small Business Administration-backed loan

Instead of borrowing funds, you may want to find investors to invest in your business, like venture capitalists or angel investors. They won’t help for free, unfortunately. You likely need to offer them business equity or control in your company. 

Another popular financing option is crowdfunding. Crowdfunding is a financing method where you ask for investments or donations, generally from a large group of people. Keep in mind that you probably need to offer an incentive if you want crowdfunding to be effective (think about company-branded swag, early access to products, or personal shoutouts!).

You can also ask friends and family for loans or investments. Treat funds from family and friends seriously by creating a contract and payment plan (friends and family are worth their weight in gold, but only if you pay back borrowed funds!).