Running a small business means wearing a lot of hats.
One day you’re focused on customers and sales. The next, you’re looking at your books, renewing a license, thinking about hiring, or trying to figure out whether you have enough cash to cover next month’s expenses.
You don’t have to know everything about running a business on day one. But understanding a few important basics can help you make better decisions, avoid preventable problems and know when it’s time to ask for help.
Whether you’re just getting started or you’ve been in business for years, here are 10 small business basics every Virginia business owner should know.
1. Keep Your Personal and Business Finances Separate
It can be tempting, especially when you’re starting out, to use one bank account or credit card for everything.
Keeping your business and personal finances separate makes it easier to understand how your business is actually performing, track expenses, maintain accurate records and prepare for tax time. The IRS also recommends keeping separate business and personal accounts to make recordkeeping easier.
At a minimum, consider maintaining:
- A business bank account
- A business credit card, if appropriate
- A system for recording business income and expenses
- A clear process for transferring money between the business and yourself
If you occasionally have a legitimate expense that serves both business and personal purposes, keep track of the business portion and follow the appropriate rules for documenting and deducting it.
The takeaway: Your business finances should tell a clear story about your business. Make that story easier to understand from the beginning.
2. Know Your Business Structure and Responsibilities
Your business structure affects how your business is organized, how it is taxed and what responsibilities you have to maintain it.
Virginia businesses may operate as sole proprietorships, partnerships, limited liability companies (LLCs), corporations and other structures. Each has different requirements and considerations.
Choosing a structure isn’t simply about picking the option with the shortest name or the one another business owner uses. Consider factors such as liability, taxes, ownership, management, funding and future growth.
And remember: forming your business is only the beginning. Depending on your structure, you may have ongoing responsibilities with the Virginia State Corporation Commission (SCC), such as annual registration requirements, reports or maintaining a registered agent and registered office.
If your business structure changes, your responsibilities may change with it.
The takeaway: Know what type of business you have, why you chose it and what you need to do to keep it in good standing.
3. Understand Your Licenses and Permits
Registering your business doesn’t necessarily mean you’re finished with registration and licensing requirements.
Depending on what you do, where you operate and what industry you’re in, you may need federal, state or local licenses, permits, registrations or certifications.
For example, requirements can vary based on your profession, industry, location and activities. Local governments may have their own business licensing, zoning or permitting requirements. Business One Stop provides information to help Virginia businesses identify requirements that may apply to them.
Before you open your doors or expand into a new activity, ask:
- Do I need a state license or certification?
- Does my industry have special requirements?
- Does my city or county require a business license?
- Do I need a zoning or home-based business permit?
- Are there permits associated with my location or activities?
- Do any of my licenses need to be renewed?
Requirements can change, so don’t assume that what worked when you started will always be enough.
The takeaway: Know the requirements that apply to your particular business, location and industry, and keep track of renewal dates.
4. Keep Accurate Financial Records
Good financial records aren’t just for tax season.
Your records can help you understand whether you’re making money, where your money is going, how your business is performing and where you may need to make changes. They can also help you prepare financial statements, apply for financing and support information reported on your tax returns.
At a basic level, your recordkeeping system should allow you to track:
- Sales and other income
- Business expenses
- Purchases
- Payroll
- Loans and other liabilities
- Business assets
- Supporting documents such as invoices, receipts and bank records
You don’t necessarily need a complicated accounting system. What matters is having a consistent system that clearly shows your business income and expenses and works for the type of business you operate.
And don’t wait until tax time to look at your numbers.
The takeaway: Your financial records are one of your most useful business-management tools. Use them throughout the year, not just when you’re preparing your tax return.
5. Know Your Tax Obligations
Taxes are a part of doing business, but the specific taxes and filing requirements that apply to you depend on your business structure, activities, employees and other factors.
Virginia businesses may need to register for different tax types depending on their circumstances. Virginia Tax identifies common business tax types that can include retail sales and use tax, employer withholding and corporate or pass-through entity income tax.
Your federal tax responsibilities can also vary. Depending on your business, you may have income tax, self-employment tax, employment tax or excise tax obligations.
The important thing is to know:
- Which taxes apply to your business
- When returns and payments are due
- What records you need to maintain
- Whether you need to collect and remit sales tax
- Whether hiring employees creates additional tax responsibilities
If you’re unsure about your tax obligations, don’t guess. Start with the appropriate government agency or talk with a qualified tax professional.
The takeaway: Understand your tax responsibilities before a deadline arrives, and build tax planning and recordkeeping into your regular business routine.
6. Understand Employment Responsibilities Before Hiring
Hiring your first employee is a major milestone. It also brings new responsibilities.
Before bringing someone onto your team, understand the difference between an employee and an independent contractor. The IRS looks at factors such as behavioral control, financial control and the overall relationship between the worker and the business when determining worker classification. Simply calling someone a contractor doesn’t make them one.
Employers may also have responsibilities related to:
- Payroll and employment taxes
- Wage and hour requirements
- Required employment forms and records
- Unemployment insurance
- Workplace safety
- Workers’ compensation
- Employee policies and documentation
In Virginia, for example, employers subject to unemployment insurance requirements have obligations to register, pay applicable taxes and provide timely information when former employees file claims. Virginia also generally requires workers’ compensation coverage when an employer regularly employs more than two employees, with additional rules that can apply when subcontractors are involved.
Employment requirements can also change over time. Virginia’s employment laws include requirements that apply to hiring and workplace practices, so staying current matters.
The takeaway: Don’t wait until you have a problem to learn how to be an employer. Get familiar with your responsibilities before your first hire.
7. Protect Your Business With Appropriate Insurance
Insurance can help protect your business from risks that could otherwise create a significant financial burden.
The right coverage depends on your business, industry, location, employees, customers, property and other risks. Common types of business insurance can include general liability, professional liability, commercial property, product liability and business interruption coverage. Some types of coverage may also be required by law.
Start by asking:
- What could go wrong in my business?
- What would it cost if that happened?
- What risks could I reasonably absorb?
- What risks should be transferred to an insurance policy?
- Does a contract with a customer, landlord or other party require specific coverage?
- Has my business changed enough that my current coverage needs to be reviewed?
For example, adding employees, purchasing equipment, moving locations or taking on larger contracts may change your insurance needs.
An insurance professional can help you evaluate your risks and understand your coverage options.
The takeaway: Insurance isn’t just another expense. It’s part of managing the risks that come with operating a business.
8. Monitor Cash Flow
A business can be profitable on paper and still experience a cash-flow problem.
That’s because profit and cash flow aren’t the same thing. Profit measures revenue and expenses over a period of time. Cash flow focuses on when money actually comes into and goes out of your business.
For example, you might make a sale today but not receive payment for 30 or 60 days. Meanwhile, your rent, payroll, suppliers and other bills may be due much sooner.
That’s why it’s important to monitor:
- Money coming into the business
- Money going out
- When customers are expected to pay
- When bills and other obligations are due
- Upcoming large expenses
- Available cash reserves
- Debt payments and other fixed obligations
Reviewing cash flow regularly can help you spot potential gaps before they become emergencies.
It can also help you make better decisions about hiring, purchasing equipment, taking on new work or pursuing financing.
The takeaway: Don’t just ask, “Did we make money?” Ask, “Do we have the cash we need to operate and meet our obligations?”
9. Protect Your Intellectual Property and Business Information
Your business may have valuable assets that don’t appear on your balance sheet.
That could include your business name, logo, original content, photographs, software, inventions, designs, customer information, processes, proprietary information or trade secrets.
Intellectual property can take several forms. The U.S. Patent and Trademark Office identifies four primary types: patents, trademarks, copyrights and trade secrets. Each protects different types of business assets and has different requirements.
Start by identifying what your business owns or creates that has value.
Then consider:
- Have you searched your business name before investing heavily in branding?
- Do you know which parts of your brand may be protected as trademarks?
- Who owns content created for your business?
- Are contracts clear about ownership of work created by employees or contractors?
- How are confidential business records protected?
- Who has access to sensitive customer, financial or proprietary information?
- Do you have appropriate agreements or internal policies in place?
Protecting business information isn’t only about legal filings. It’s also about good internal practices, including limiting access to sensitive information, using strong security measures and knowing what information should remain confidential.
The takeaway: Know what makes your business distinctive and take reasonable steps to protect the assets and information that matter.
10. Know Where to Turn for Help
You don’t have to be an expert in accounting, taxes, employment law, marketing, financing, procurement, cybersecurity and every other part of running a business.
In fact, knowing when to ask for help is an important business skill.
Virginia has a broad network of organizations that support small businesses, including:
Virginia Department of Small Business and Supplier Diversity
SBSD provides business education, training, counseling and connections to resources for Virginia entrepreneurs and small businesses. Its Business Development and Outreach Services team can help businesses identify needs and connect with appropriate support.
Virginia Business One Stop
Business One Stop brings together information and resources to help entrepreneurs and business owners start, navigate and grow their businesses. It can be a useful starting point for questions about registration, licenses, permits, taxes and other business requirements.
Virginia Small Business Development Centers
Virginia’s SBDC network provides counseling, training and resources to help entrepreneurs and existing businesses address business challenges and pursue growth.
Virginia APEX Accelerator
APEX provides assistance to businesses interested in pursuing government contracting opportunities.
Virginia Small Business Financing Authority
VSBFA provides financing programs and credit-support tools designed to help eligible Virginia businesses and other organizations access capital.
Local Economic Development Organizations and Chambers
Your local economic development organization and chamber of commerce can connect you with community-specific resources, networking opportunities, local business information and other support.
The right resource depends on what you need. You may use several of these organizations at different points in your business journey.
The takeaway: You don’t need to know exactly where to go before you ask the question. Start by explaining what you’re trying to accomplish, and let the right resource help you take the next step.
Small Business Success Starts With the Basics
There is no shortage of things to think about when you’re running a small business.
But you don’t have to solve everything at once.
Start with the basics:
- Separate your personal and business finances.
- Know your business structure and responsibilities.
- Understand your licenses and permits.
- Keep accurate financial records.
- Know your tax obligations.
- Understand employment responsibilities before hiring.
- Protect your business with appropriate insurance.
- Monitor your cash flow.
- Protect your intellectual property and business information.
- Know where to turn for help.
As your business grows, revisit these areas. Your needs can change when you add employees, introduce new products, move locations, take on larger contracts, purchase equipment or expand into new markets.
The goal isn’t to know everything.
The goal is to know what matters, stay on top of the basics and know where to find help when you need it.
Ready for Your Next Step?
Virginia’s small business support network is here to help.
Whether you’re starting a business, strengthening an established company, exploring financing, hiring your first employee or looking for your next opportunity, there are organizations and resources available to help.
Start with Business One Stop, explore SBSD’s business resources or connect with a small business counselor to find the guidance that fits your needs.
Your business may be small. Your next step doesn’t have to be.
