Statistically, 30% of entrepreneurs do not keep their business and personal funds separate.  Seriously?

I have heard people say that their business is too small to bother with a separate checking account.  Really?  How long are you planning to have it stay small?  Shouldn’t you be planning for and expecting it to grow?

Separate Your Accounts

One of the first things you should do when you are setting up your business, is to set up a business account that is separate from your personal account.  It doesn’t have to be a “business” account by banking standards. It can be a personal account that you designate as your business account.  Set it up in a different bank.   You may have to transfer funds from your personal to your business account at first, but as your business gets established, you will be transferring the money in the other direction – from the business account to your personal account.

As soon as possible, establish a weekly, or semi-monthly amount to be automatically transferred from the business to the personal account.  This is your payout.  Eventually, you may choose to have a payroll company do this for you – especially if you have formed a corporation.

If you do open a bank-designated business account under your DBA or LLC name, be aware that there will be a 2 week (10 business days) hold on your initial deposit.  This can be extremely inconvenient if you are caught unawares, as I was.  This is due to a new law that went into effect April 2018.  Just be aware and plan accordingly.

Make Separate Tax Accounts

Do you sell products and collect sales tax?  You must have a separate account where you set aside the sales tax.  Consider opening a savings account at a credit union where you have no fees, no minimums, and your money is earning 2% interest.  You might as well have this money working for you, right?

The same goes for income tax if you haven’t set yourself up as a w2 employee.  Set up a separate account and transfer 35% of the amount that you are paying yourself weekly or semi-monthly.  Put it into an account where it’s earning interest.  Otherwise, you may as well send it as a prepayment to Uncle Sam. Right? No. Let your money work for YOU.

When I was a child, I used to empty my coin bank out onto my bedspread. Each coin had a face on it, so that was enough for my imagination to imbue them with personalities. I had my coins chatting with each other about all sorts of things.

My mother once caught me at this and it set off all sorts of alarms for her. She didn’t like that I was playing with my money.

I once heard her telling a neighbor that I was a miser. Ten years old and already being labelled as a miser! This was because I had several banks that I had labelled with different financial goals. One was for CANDY, one was for GIFTS and one was for TRIP. (I got the idea from a graphic image on the side of one of the banks that showed a girl with a bank that said “Trip to Paris”. I had learned to budget from seeing that image, without even knowing that that was what I was doing!) I received a weekly allowance of 50 cents which I then divided between the banks. Sometimes I would dump out the money from the various banks and count it to see how much I had accumulated. When she saw me happily counting my savings, that must have conjured up creepy images for her of Scrooge-like characters.

I can’t blame her. Those images were the result of the social narrative put in place at a time when the country was recovering from The Depression. Movies and books were full of stories of the noble poor being beaten down by the greedy rich. These stereotypes were deeply ingrained back then and still linger.

The message I got back then was was confusing. Was she saying that saving money was bad?

There was a “Don’t Ask, Don’t Tell” atmosphere around money; similar to the response I got later, when asking my parents about sex.

Funny how the negative comments from our parents stick with us like flies on flypaper.  How many of us then take on those negative labels – or spend a lifetime proving them wrong?

Hi!  I’m Susie Fabrocini and I am a Serial Entrepreneur.

Or, as my ex-husband used to say, “the Career-Of-The-Month Club”.

This blog is about entrepreneurship.

Over the years I have learned a few things and I’m still learning things.  Learning by doing.  Falling down and getting up.

I think that’s how most entrepreneurs do it – learning by making mistakes. And we are usually flying solo. Working out of our home office – AKA – the corner of our apartment.  No water cooler gatherings – although we may have numerous heart-to-heart conferences with our four-legged companions.

(Shared work spaces, like WeWork, are becoming increasingly popular.  I haven’t tried it yet because my financial services business required lots of private meetings so I was renting an outside office for that. Something to look into for the future?)

Wouldn’t it be great if we could share our experiences? Thus, cutting the learning curve by learning from each other’s mistakes – and from each other’s successes. This my intention in building this site.

Please join me in creating a community of entrepreneurs who share experiences and resources and lift each other up and move each other forward.

I have always been one to learn by doing. That comes from being raised by a do-it-yourself kind of mother. She was amazingly self-reliant.
I’m building this website myself, and I’m not young technical savant so there will be a lot of changes to the site as I figure out what I’m doing and what is possible.
For more about me, who I am and where I come from, go HERE.

Why Now

I’m starting a new business right now. My original intention was to keep a handwritten journal and then write a book someday, recounting the process in order to help others who may want to do something similar. When I was younger, I wanted to make films. Not having attended film school, I read books on film making instead. One particular book made all the difference for me. It was Robert Rodriguez’ book, “Rebel Without A Crew”, in which he recounted his experiences in making his first film. His book was a inspirational and encouraging to me because it went beyond giving facts and information. It was also full of stories and emotion. (For a list of other film making books I found helpful go HERE.) I ended up making 4 or 5 short, low budget films.  Even received a couple of grants and awards!

Now, with the wonderful world of internet blogging, there is no really good reason to wait until my business is up and running and successful before telling the story.

Especially, if by sharing, I can help someone else or someone else can see what I’m doing and offer advice that would be helpful to me!

The business I am starting now is a real estate investment business, but a lot of the decision-making processes I go through will apply to many other businesses as well.

And by the way,  you are never too old to start a business.  Here is a photograph of me and my 2 daughters, taken 3 years ago.

Shifting Strategies

As 2018 rolled in with its new tax laws, favoring corporations, I decided it was time for me to become a corporation. My financial services business would stay as a sole proprietorship but it was time for me to make my side thing, real estate investing, into a main thing.

Choosing A Corporate Structure

The first thing I needed to do was to decide on what sort of corporate structure to use: LLC, S-Corp, or C-Corp?

Looking at it from a taxation viewpoint, an S-Corp is a pass-through entity. That means that all of the revenue is treated as regular income to the owner and is reported that way on the taxes.

With a C-Corp, the revenue comes in as income to the corporation and is taxed at the lower corporate tax rate. Money that I paid myself as wages (W2 income) would be taxed to me as income and I would pay social security taxes as well as income tax. Then the corporation can write off those wages as tax deductions. Money that I paid myself as dividends, I would pay a lower dividend tax rate and avoid the social security taxes, but the corporation would not get the tax deduction. If you are trying to build up capital within your corporation, then this would be the way to go.

An LLC can choose to be taxed as either an S-Corp or a C-Corp – and can change that determination from year to year. For this reason, I decided to go with the LLC.

Where to File?

After doing a little research, I decided to file my LLC in Wyoming.  Why Wyoming?  Well, it is a lot less expensive to file there than it is in California.  I currently live in California but will probably not be doing any real estate investing in California.  Wyoming has no state income tax and no business tax.  They also have better privacy laws there.

There is a lot of paperwork to do when forming a corporation.  Lots of paperwork is not my thing, so I went online and found a company that would do my filing, apply for my EIN, and take care of the mounds of paperwork, then send it all to me, along with a binder and a corporate seal for a very reasonable fee.  It was surprisingly easy and they did it in a couple of days!  The last time I formed an LLC in Los Angeles, it took months!

Naming the Business

I was excited to get my business started, but the first page of the LLC application was asking for the business name.  Hmmmm.  I guess I need one.  Asking friends and colleagues, I gathered quite a few clever suggestions; like, House2Home or Turnkey Properties.  However, upon further consideration, I realized that if I am going to build a multi-million dollar business that might be sold one day, I should skip the cleverness and go for a simpler name that inspires me.  That is why I chose Bamboo Properties.  Bamboo is a very resilient plant and a strong material for building.  It grows fast and is hardy.  It is a symbol of good fortune.  Adding the word, Properties, makes it fairly clear that this is a company dealing with real estate.

Okay, got my business named; got my corporation formed; I’m ready for business!

The company that helped me set up the LLC had a relationship with Bank of America and they were offering quite a substantial bonus package for opening a business account with them.  I hate B of A, but I was seduced by their offer.  I spoke with their representative, who filled out the application for me over the phone.  It was for a checking account and a credit card.  Well, they sent me a credit card but turned down my application for a checking account.  I have no idea why.  I sent an email to the rep who had helped me on the phone but he didn’t respond.  My original opinion of Bank of America was thus reaffirmed.

Next stop – Wells Fargo.

I already have a business account with Wells Fargo, as well as a Trust account, so I figured this would be easy.  Not so fast…

First, the business banker told me that since there were 4 owners of the business, all four would have to be present to sign the account application!  This, even though I am a 60% owner, my ex-husband is a 20% owner, and each of my 2 daughters own 10%.  I rolled my eyes and told him “That’s not gonna happen!”  They live in a different city and they all have different schedules.  One of my daughters only has Sundays off.

Then he said everyone could go to a different branch but they have to all be there at the same time and that there are some branches that are open on Sundays.

I thanked him and left to make calls to credit unions.

I really prefer working with credit unions but every one that I contacted told me they only do business accounts with local businesses and I was not local to any of them.

Made arrangements with all the family members to be available to go to the bank on Sunday morning.  Headed back to Wells Fargo.  The previous banker was out for a few days.  I sat, instead, with the Senior Business Banking Specialist.  He tells me that I don’t need everybody else to sign because I own 60% and no one else owns over 20%.

Apparently the laws have changed since I last opened a bank account and now a lot of additional documentation was required.  Ugh.

Additionally, they want to put a 10 business day hold on the funds I am depositing.  This, because it is a new account – even though I am a long-time customer.

The take-away here?  Be prepared to have your business account to take longer to set up than your corporation!

***I since found out that a new law went into effect in April,2018, that funds in new business accounts cannot be accessed for 10 business days.  If you are planning to open a business account, I would suggest that you open the account with a small amount of money until the 10 days pass. Don’t open the account with a lot of money (like I did) – especially if you know that you will need access to those funds in less than 2 weeks.

What Color To Paint The House?

I find it to be very scary trying to choose the paint colors for the house exterior.

What if I make a horrible mistake?  It is not an easy fix.

Much to my delight, I discovered the Sherwin-Williams website has a ColorSnap Visualizer, which allows you to “try on” colors. I was able to upload a photograph of my house and then try out different paint colors to see how they look together. Here is what I ultimately came up with:

You must register on the site in order for your color choices to be saved.  They offer images of interiors and exteriors to “paint”, choosing colors from their color palette.  There is also an option to upload your own image.  I took advantage of that option and, although the program was able to save my color palette, it wasn’t able to save and store my photo, so after each change that I made, I saved a screen shot of my work to my computer.  When my painter asked me if I had chosen my colors, I was able to give him a list of the colors with their Sherwin-Williams number and color name AND I sent him the photo showing the color placement as well.

When fixing up properties, whether to rent or sell, I make lots of purchases from Home Depot.  I don’t want to use my personal card, because it will affect my credit score in 2 ways.

First, by raising my debt to available credit ratio, and

Second,  by raising my debt to income ratio.

Home Depot has several options for credit accounts.

Two of them are business accounts.  One is for a commercial revolving charge card.  This means that I can carry a balance and make payments as I want.  The other business option is a commercial account.  With this account you pay it off in full every month – or every 2 months – depending on how your accounts payable is run.

When I went to fill out the online application for the revolving charge account, I came upon the question of how much does my company make annually and how much do we take in monthly?  As a new business with no income yet, I was flummoxed. How do I respond?  Zero would be the true answer – but that seems like a bad answer for a credit application. The optimistically projected monthly sales will look more like $260,000 in gross revenue.  What to write?

CUSTOMER SERVICE?

After going crazy calling every number on the website,  I finally got hold of a very nice real live person by calling 800-466-3337 and not responding to any of the recorded lists of options which just send you into more automated processes and keep asking for your account number.  After four and a half minutes, I was connected to a live customer service person who transferred me to a credit service person, a lovely woman named Peggy.  She made some inquiries and told me to put zero on the form and they would contact me for further information. I did, and they did.

Ultimately, I ended up with a commercial revolving charge account.  My limit is $5000.  This is less than I would like to have, but will still be helpful with record-keeping for each project.

THE LESSON HERE:

It took me hours to get the credit account set up and then to put in my first online order.  Best to set up your credit accounts at least 2 weeks in advance of when you think you will need to use them.

ADVANCE PAYMENTS

I generally do not pay contractors for labor in advance.  It is very risky to do so.  I will pay materials up front, though it is better to pay the supplier than the contractor because they often spend the upfront money on other things.

Today I am faced with a conundrum.  A contractor who is going to be doing a lot of different jobs for me has asked for $1000 up front and I thought this was fair so I said okay and to send me an invoice for the total job so that I could pay the $1000 against that invoice.  What he sent me was a messy invoice requesting a draw of $1500.  Looking at the list of work to be done, there is less than $1000 of materials total.  I am going to just send the check for $1000 because that is what I agreed to but am realizing now that even that much is a risk to pay in advance.

GOING FORWARD

From now on, my initial response to payment requests will always be, “let me get back to you on that.”  More time needs to be spent thinking things through when it comes to finances or I will destroy my business very quickly.

On Thursday, I am going to pack up a rental mini-SUV and head up north to oversee the major part of the renovation work.  Husband wants me to take the dog with me so I am having to preplan more thoroughly than usual.  Have made a reservation at a pet friendly hotel along the way.

When I get to Idaho, we will stay at the house while it is being worked on.  I have done this before, although never with a dog in tow.  We’ll see how this goes.

Paying Myself As an Employee

I want my business to pay me $1000/month as regular income.  This will be my starting pay until the company is bringing in revenue.

What do I mean by “regular income”?  By this, I mean that I will be paid as an employee and receive a paycheck with all of the usual State, Federal, Social Security taxes deducted from the check.  I will also receive a W-2 form at the end of the year.

Why do I want to do this?  To show consistent income for the purpose of getting loans or applying for credit.  I will also receive dividends as will the other owners and investors in the company.  Dividends are taxed differently from regular income.  They are taxed at a lower rate.

Making It Easy With Payroll Apps

In order to make that happen, I am looking at payroll apps or software that will handle the state, federal and social security tax withholdings for small businesses.  So far, it looks like Gusto may be the platform for me.  They are offering a one month free trial and then it will be $39/mo plus an additional $6 per person per month.

Setting Up A Virtual Office

As I was filling out the forms for my trial month, I realized that it is time I set up a Wyoming address for my Wyoming LLC in order to not be considered a California Business, and have to pay CA corporate business tax.

I found a company that will provide me with a registered agent and a virtual Wyoming office, complete with Wyoming mailing address and Wyoming phone number.  All this for $30/month!  Really?  I must check this out!

The Set-Up

So, I have set up my virtual office in Wyoming.  The cost for setting up were: