We made some good progress over the past week and scratched a few more items off the list. A little while back, we started off with a long checklist of steps we needed to take in order to start our businesses, and each week we’ve been crossing things off the list. It a great feeling. Tammy and I like to talk about where we could be in a few months at our current rate of progress, and what our lives could be in 6 months to a year. We’re very optimistic but we also keep ourselves in check.

If we were both in our twenties and had fewer responsibilities and obligations, we may have taken a different route to become self-employed. But at this stage in our lives, we are very careful and thoroughly analyze every option before we make a decision. It’s too easy for unexpected bumps to appear in the road so we like to plan with an eye on security. And the greatest security I know of is to be financially self-dependent; to be responsible for your own sources of income rather than be totally dependent on your employer’s business doing well, or the economy remaining stable and not losing your job. Considering the fact that so many people’s lives have been uprooted due to losing their jobs, it seems like less of a gamble to start a business while I continue to work 40 hours per week at my current day job. So we keep chipping away at our business To-Do list. So for this week, here’s what we’ve done:

• Met with our attorney to review and approve our Operating Agreements for our LLCs
• Tammy registered a “fictitious name” or DBA (“doing business as”) for her website and filed it with the SCC (State Corporation Commission)
• Opened business checking accounts
• Reviewed Business Group Health Insurance Plans

Operating Agreements

Last week we met with a business lawyer to discuss our businesses to make sure we’re doing everything that we need to be doing. This is so we don’t run into problems later on after learning we missed some details during the early stages of setting up our businesses. I want to remind everyone that Tammy and I are each starting separate online businesses. We’ll each have a website through which we’ll sell products and/or services. This process can be very simple and may not need a business attorney. But if you want added security, this can be a beneficial step.

This week, we met with our lawyer to pick up copies of the Operating Agreements we paid him to draft for us. An operating agreement is a document that lays out the details of how you will run your business. This document is sometimes required by banks when applying for business loans, opening accounts, and such. Our attorney’s fee was $100/document. Our agreements were exactly identical except our individual names and business names were changed. So, essentially, we overpaid by $100 because we could have taken one copy of the operating agreement and reproduced it ourselves. Chalk that one up to a business education expense. Could we have drafted both business agreement ourselves? Sure. But that would have required additional time (which is already in short supply), and delay, and we would be left with the uncertainty of knowing whether or not we did it right. Therefore, we think even $200 is a fair price. Not absolutely required for single-owner LLCs (Limited Liability Company), but we wanted to have them anyway.

Registering a Fictitious Name or DBA

DBA means “Doing Business As” and is also called a “fictitious name.” Since Tammy and I both have separate businesses and separate LLCs, and since we’ll both have websites where our products will be sold, we will register our websites as fictitious names that are associated with our LLCs and then file the fictitious names with the SCC (State Corporation Commission). So this would mean that the LLC is doing business as the website name. Registering a fictitious name at the county court costs us $10. Filing the fictitious name with the SCC costs another $10. The requirements and fees in your state may vary. Tammy has already filed her DBA paperwork and submitted it to the SCC. I didn’t have time to do that yet, so that’s on my agenda for next week. I hope this makes sense. Just comment if you have any questions about this.

Business Checking Accounts

During the past year, almost every major bank in America has been affected in some way due to global financial instability. However, most credit unions were not significantly affected or were not affected at all. We took that into consideration when selecting a banking institution where we would open our business checking accounts. Also, we were looking for online access to our accounts and wanted to pay as few monthly fees as possible. However, you typically have more restrictions on how many checks and transactions you can do each month when you pay little or no fees. You’re also required to keep a minimum daily balance of a couple hundred to a few thousand dollars, which can be a bit steep when you’re just starting a business. After reviewing traditional bank offerings and a couple credit unions, we chose a local credit union. In the end, we secured a promotional fee-free business account with no transaction limits and no minimum daily balance requirement. The promotion had already ended but because it was still listed on their website, they gave us the promotional account. We were jumping for joy when we got home. Business bank accounts can be costly when you starting a new business. After all, the money isn’t rolling in yet, so the fees and requirements pinch a little at first.

Another thing I want to point out relates to a recent post Tammy wrote: How to Protect Your Business Funds from Hijackers. In that post, she suggested opening two checking accounts; one would be the “public” account where we would conduct “visible” business transactions; the other account would be a “hidden” account that is never shared with the “public” or basically anywhere. The hidden account is where most of the business funds would be held. The theory is that if identity theft occurred and your account was hijacked or hacked into, they would only have access to the small amount of funds in that account and couldn’t touch the majority of your funds which are in your hidden account.

When we were setting up our business accounts, we discovered that most credit unions require you to open a savings account along with your checking account. If we had opened two checking accounts, we wouldn’t have been able to transfer funds from one account to another online because each checking account would be a completely separate account and are in no way associated with one another. So, we ended up opening a checking and a savings account, which satisfies the credit union requirements and gives us the two account system we need. So if you ever set up a business checking account, just keep this in mind and make sure your two accounts play nicely together and will allow you to accomplish your goal of “hiding” one account from John Q. Public.

Business Group Health Insurance Plans

By now, I’m convinced that hitting my head against a brick wall while standing barefoot on piles of broken glass and salt would be far less painful then trying to sort out health insurance options if you have a Worker’s Compensation injury or pre-existing conditions to consider. However, there is potentially some good news, which I’ll come to in a minute. As I’ve mentioned in previous Self-Employment Progress updates, we’re exploring health plans and we’re hoping to find something affordable that will cover pre-existing conditions and a Worker’s Compensation injury. Most plans we’ve found will cover pre-existing conditions right away, as long as you have no lapses in health insurance coverage. If you do have a lapse (a time when you were not covered by a health insurance plan), then there is typically a waiting period from one to two years before the pre-existing condition is covered. If you have a Worker’s Compensation condition, most health insurance plans have an exclusion clause that states that ‘no worker’s compensations injuries will ever be covered…EVER!’.

The good news is, from what I can see, there are “reasonably” priced health insurance plans available for self-employed people. You can start a group plan through your business as long as you have a minimum of 2 employees/members in the plan. So in my business, I can consider myself and Tammy employees. Two employees means I can start a business group health insurance program for my company. I should state that this is how I understand it right now. We’re still exploring this option – which was recommended to us by a representative of members’ health insurance plans at the NFIB (National Federation of Independent Business). We’ll get more information next week, but it looks promising so far. According to the rep we spoke to – if we set up a group health plan for a two-person company, all pre-existing conditions and Worker’s Compensation injuries would be immediately covered.

During our phone conversation, I was careful to restate, in my own words, what I thought he was saying to make sure I was understanding him. He was very clear about this issue and assured me that I was understanding him accurately. I have to admit, I’m extremely dubious about this. I can’t understand how just setting up a business group health insurance plan would totally avoid a waiting period for pre-existing conditions and would include Worker’s Comp. injuries as well. We will be making follow-up calls and doing more research on this issue and will report what we learn.

Next week

I plan to register my fictitious name for my business website. We have an appointment scheduled to sit down with a CPA (Certified Public Accountant) to discuss taxes, bookkeeping, etc., but our appointment is a couple weeks away, which was the soonest we could get in to see her. We’ll continue to research health insurance options. And might start taking steps toward establishing our websites. Stay tuned…

A big “Thank you” goes out to our regular readers. We sincerely hope that by keeping tabs on what we’re doing, you are learning something useful through our experiences, and that you may be also inspired to launch your own online business. We would love to hear from you. So if you have any questions or if you want us to explain or talk more about any specific subjects, please leave us a comment. What are YOUR questions regarding starting an online business? How can we help you?