Do you ever feel like you’re going to go to jail just for starting your business? It doesn’t get any better once you’re working with clients. How should they pay you? How do you pay yourself? Are you going to get in trouble if you splurge on some new headshots for site? What even are these magical business bank accounts everyone seems to have and do you need one?!

Woah woah woah, hold up there lady, as my friend Rachel Hollis would ask…”have you even washed your face yet today?!” Let’s break this down in a way you can comprehend pre-morning caffeination.

Even though I’m not a lawyer*, I asked my friend Christina Scalera from The Contract Shop®  if she could give us some easy pointers to help us all out. If you’re feeling like a fraud who could be ‘found out’ at any second, checking off these seven steps can help you get a little closer to a quiet bubble bath tonight sans that annoying “what if” monster (you’re on your own if your husband likes to vacuum during this sacred time a la Drew). Here’s what she told us…

Step 1. Grab your EIN from the IRS

EIN stands for Employee Identification Number and it’s free and helps you set up your bank accounts. When you set up a business, one of the first things you can do that will make a world of difference over the long run is grabbing something called an “employee identification number” (aka, your EIN). You can do this here from the IRS if you’re based in the US or want to sell in the US.

Your EIN replaces your social security number when you’re working with clients or when you become an affiliate to sell someone else’s product, because who wants to give strangers that info?! Even if they’re super cute on Insta, I don’t want my personal social security number out there going who knows where. Plus, you’ll need an EIN for Step #3 below, which is SUPER important to keep your business and personal finances separate. It’s not that hard either!

Step 2. Get your contracts in place.

These would be client contracts if you sell services, or get your Terms & Conditions in place if you sell products. Christina said this is Step #2 because if you don’t have anything for sale (a service or product), then you don’t have a business! Too often, we want to jump in and check off all the boxes to feel legit. But the best way to kickstart our creative career is to actually GET OUT THERE!

No one wants to run into problems with clients, which is why I recommend you check out The Contract Shop® to grab a contract that applies to you. They have specialized agreements that are super easy to customize and send to clients faster than it takes me to peel Tucker out of Drew’s arms every night.

Step 3. Open up a business checking account.

It’s about the money, honey! Open up a separate business checking and sign up for PayPal for your bix. You’ve probably heard people vaguely reference how important it is to separate your business financial accounts from your personal bank accounts. Well, they’re not wrong, but I want to explain this a bit further in case you want details on how to do this.

It’s super simple– once you have your EIN, you can open up any new bank accounts, like a checking account, PayPal account, Stripe or Square, credit cards (though I’m not a fan of debt) or any other account that will accept, save or spend money on behalf of your business. Keeping your business accounts separate from your personal accounts may sound like a little thing, but it means a lot in the eyes of the law. Plus, I’m a fan of building a debt-free business, and trying to do bookkeeping with everything commingled is a nightmare and a sure way to let your finances get out of control quickly.

Episode 165 of The Goal Digger Podcast was ALL about how to pay yourself, click here to refresh your memory!

Step 4. Grab some insurance.

An LLC is great, but we haven’t gotten there yet, and insurance is what can actually help pay for any damage you do by accident. What I love about Christina is she doesn’t just hash out the same information you can find everywhere else. A lot of people would tell you to get an LLC first, but to her point, if you don’t have money coming in you don’t have a business yet (see step #2 above). And if you need ideas about how to start this cashflow, click here to listen back or read my Friday bonus episode, 5 Ways to Make More Money.

Plus, an LLC probably isn’t the best use of your limited funds as you’re getting started. We’ll talk more about what it does in the next step, but basically, if anything were to happen… like, bad stuff… client stuff… an LLC would let the client come after your business’ assets, but you’d still have to pay.

Business insurance, on the other hand, is a lot like car insurance– you pay a premium, you meet a deductible, and then your insurance pays the client for any claim they’ve alleged against you. Without business insurance, you’d be paying that claim out of the pocket of your business, and who knows how much money you’d be on the hook for. Insurance people have a reputation for trying to sell you even more policies, so it shouldn’t be very hard to jump on the phone with one and get your biz insured. If you don’t know where to start, try the company you use for your car, renter’s or homeowner’s insurance. They should be able to point you in the right direction.

Step 5. Start thinking about your workflows.

Can you turn any of your repeatable processes like Instagram, blogging or editing photos into a repeatable system? One thing that can help reduce your insurance costs, and save you a TON of end-of-day, “I feel like I got nothing accomplished!” moments is to have repeatable processes in place. Insurance companies love to see that if X happens, you do Y, every time. I’m a big fan of writing these down– if they’re still only in your noggin’ they don’t count.

This has made a world of difference too as I’ve transitioned from solopreneur to team, because I was able to share all my written processes when training my team which made it a much more seamless process. Need an example of this? Click here to see how I batch all my Instagram content in one of the best systems in my business!

Step 6. Time to file for an LLC.

After all of the above, it may actually be time to file for an LLC. There’s a reason this isn’t step #1, though! We are finally to the step everyone seems to be so hung up on, your LLC! Now that you have all the stuff that matters in place, it’s time to ice the cake with the LLC (aka limited liability company). Think of an LLC as a legal force-field that surrounds your personal life and assets, protecting all the things you’re working so hard for from dissatisfied clients, debt your biz racks up or mistakes you make in the line of work that you have to pay for (hint: don’t use chinese lanterns during a fire ban).

An LLC is usually really easy to get, because they’re a huge money maker for states. An LLC is filed in the state where the business owner is doing most of their business. This is called the “primary place of business.” If you’re not sure about where this is, you can ask an accountant. Usually, this is where your office is located. And for you work-from-homers (heyyyyaaa!) this is where your home office is.

An LLC is usually pretty cheap (well, unless you’re in California or Illinois), and is typically renewed every year. Don’t worry, your state will probably be annoying about reminding you. Remember, they want your money.

Step 7. Gals. Pay your taxes.

It’s really the only way you’ll go to jail with your biz. Here’s a good rule of thumb: if your business is profitable and making money, you’re gonna have to pay taxes. Usually, these are filed along with your personal taxes each year.

If your business is making a lot of money, one of the first things I recommend you outsource is your bookkeeping and tax filing prep because there are experts who can help you keep even more of that money then you just doing this on your own. To learn more about outsourcing, I did a whole coaching session on it in Episode 68, click here to read or listen back on that one. And if your business is making money but you’re not paying taxes, this is really the only reason I can see that you’d go to jail, or more likely, have a hefty bill to pay at a very unexpected, not-ideal time.

So that’s it! What do you think? Do you already have some of these in place? What do you have left to do? Comment below!! I really do read these and appreciate you taking a few seconds to check in.

*By the way, I’m really not a lawyer. This article is for educational and entertainment purposes only. If you have a legal issue, make sure you get in touch with a licensed attorney who can help you out! Please don’t just rely on free internet articles 🙂