Tip 05 - Taking Care of Business

The ugly underside of starting and running a skateshop is paperwork and the “business” of running a shop. It’s unfortunate, but you’ve got to take care of it or it will take care of you in a bad way. The good news is that while it can seem overwhelming and confusing at first, once you get through it all it’s really not that bad. What I’m talking about is all the basic stuff like business licenses, permits, reseller numbers, accounting, and the like.

Generally you need to register your business with the federal government, the state government, and the city government. Each of these are separate registrations with their own unique paperwork and fees, none of which is terribly expensive. From the feds you’ll get what’s called a “tax id” or EIN. From the city government you’ll get a business license that you renew each year and you hang on the wall. And you’ll need to register with the state, although I can’t remember if they give you anything that you use very much. If I don’t sound terribly knowledgeable it’s because I don’t do this every day. A lot of this stuff you do once and then leave it and it’s hard to remember four years later exactly what the process was.

Hopefully your state government has good instructions on their website as to how to do all of this. In Utah you can do all your business registration stuff online without ever needing to go downtown or mail anything in. It’s great, and really easy. Maybe your state has it together as well and will make it easy for you, maybe not. Either way, don’t ignore this stuff, because it will bite you if you do, and like I said, it’s not really that hard to take care of.

One question you’re going to have to answer in the beginning is what kind of business entity you want to be set up as. Your choices are sole proprietorship, LLC, S-corp, or C-corp. Chances are you’re going to want to be an LLC.

What I would highly recommend doing is spending some extra money to hire an accountant or small, local accounting firm to help you get things set up. You don’t need much, just somebody who has experience with helping small retail businesses get started. If you don’t know where to find somebody, go to a few retail stores, not necessarily skateshops, and ask them how they do their accounting. Maybe they can refer you to somebody local, or maybe you’ll find someone who works at another store who’s willing to help you get things set up for $20/hour.

If you have zero accounting experience DO NOT just go out and buy Quickbooks and expect that it will take care of everything for you. At a minimum you’re going to want an experienced accountant to take care of your tax filings, if not your month-end bookkeeping. This is not do-it-yourself stuff if you don’t already know what you’re doing.

There are accountants all over the place, so it really shouldn’t be hard to find one. But in order to make sure you find the right one, follow these tips:

1. Don’t hire the first accountant you talk to. Plan on talking to at least five, no matter how much you like the first one.

2. Hire an accountant who currently works with other small retailers. They don’t have to be skateshops, they can be just about any type of retail store. On a business level it doesn’t matter whether you’re selling skateboards, women’s shoes, beds, or scrapbooking supplies. The accounting side is pretty much the same. But if you hire a guy who hasn’t done accounting for retail stores then he might lack the experience you need him to have.

3. Make sure the accountant knows Quickbooks inside and out. He doesn’t necessarily need to be certified, but he better know it really well. And yes, I recommend you use Quickbooks as your accounting software. But that’s just me, and if you talk to other skateshop owners who use something else and they really like it then feel free to try something else out.

4. Check references. That means you contact other people the accountant works with and you ask them how they like working with him.

5. Hire your accountant on an hourly basis, don’t pay a flat fee per month. Chance are you’ll end up paying a lot more in the first few months this way, but you’ll get two benefits out of doing things like this; 1) you’ll have an incentive to learn accounting yourself to save money, and 2) once you do, then you won’t have to pay him as much.

A good accountant will cost anywhere from $30-$150 per hour. I pay mine $125 per hour. Some months I pay him nothing, other months I pay him $2,000, although the month that happened it was because he did about a year’s worth of work in one month.

As with all these tips, don’t just trust me, go ask around at other skateshops and see what they’re doing. Ask them what mistakes they made when setting up their business.