One of the biggest pitfalls of taking the hobbyist route to business ownership is failing to make a complete transition from amateur to professional. Start by taking care of the following tasks:
- Open a separate checking account for the business. Your bank account balance is a quick and easy way to see how well you're doing, but you won't have a clear picture unless you're using an account that's strictly for business income and expenses. A separate account under your business's name also helps you appear more professional to suppliers.
- Get a credit card for the business. You may not be able to get the card in the business's name right away, but at least have one card exclusively for business expenses. This helps you keep your records in order and--if the card is in the business name--helps you establish business credit.
- Maintain complete and accurate records. Set up a record-keeping system from the start, and discipline yourself to stay up to date. Use bookkeeping and accounting software programs to track income and expenses, and set up a filing system for receipts.
- Document your equipment purchases. If you purchased equipment as part of your hobby and can prove the cost involved, you may be able to deduct those expenses on your tax return after you've formed your company. Talk to your tax advisor for specifics on how to do this.
