Choosing a Business Bank Account

So you have incorporated, and that is a significant step in the right direction.  All is well in the world, but now you need a place to do financial transactions.  Part of registering your business to do work for the federal government involves having a bank account to transfer money back and forth.  Choosing a business bank account is harder than choosing a personal bank account because of all the options.

The choice of business bank accounts boils down to whether you are going to carry a large balance and how many transactions you have each month.  That will determine your monthly fees. 

To establish a bank account you need the following:

• Articles of Incorporation for Corporation or LLC
• If a Sole Proprietor or Partnership you will need one of the following:
• Fictitious Name Certificate or Statement
• Certificate of Assumed Name
• Business License
• Registration of Trade Name
• Employer Identification Number (EIN)

You have choices between banks.  You can choose a big nationwide Bank, a community bank, a credit union or an internet bank.  I wanted a nationwide bank because of my business with the federal government.  Currently, I have contracts in several states, and I needed the ability to have a bank that was not local.  To compare all options, including local credit unions, NerdWallet provides an extremely handy tool called “Compare Business Checking Accounts.”  I provided my experience in the table below of three nationwide banks.

Bank	Monthly Fee	Minimum Opening Deposit	No Charge Transactions and Deposits	Interest Bearing	Online and Mobile Access
Wells Fargo (Simple Business Checking)	$10	$50	Includes 50 transactions and $3,000 in cash deposited monthly	No	The have both.  However, their online system is not as friendly as other banks.  It is somewhat difficult to use. They have online statements and access to check images.
Chase (Total Business Checking)	$10 when you are enrolled in Paperless Statements (or $12 for paper statements); waived when you maintain a $1,500 minimum daily balance	$25	Includes 200 transactions per month without a fee and $7,500 in cash deposits each month without a fee	No	Chase has the best online banking and mobile access system.  If this is important to you, then choose them.
Bank of America	No monthly fee first two months, then $17/month	$100	500 transactions per month at no cost. Additionally you can deposit up to $25,000 cash to the account without a fee.	No	I have not used their online or mobile access, but they do provide it.

If you know me, Linda Rawson, I am commonly called she-geek.  So the relatively small difference in cost made me want the high-quality online banking.  We use Quickbooks Online, and it synchronizes with Chase.  Don't make the decision for a business bank account quickly but analyze your true needs as a business owner.

Choosing a Corporate Structure (One size does not fit all)

DISCLAIMER:  I, Linda Rawson, am not an attorney or accountant.  I am merely giving you my opinion and lessons learned from my experiences.

 

Okay.  Pay attention to that disclaimer as I will be referencing it again.  The proper way to choose a corporate structure is to consult an expert such as an attorney or accountant.

One of the first and most important choices when starting a business is the selection of the type of legal entity your company will be.  This decision will affect how much you pay in taxes, how much paperwork you will need to do, determine personal liability and impact the ability to raise money through the sale of equity.

I reviewed C Corporation, S Corporation and Limited Liability Company (LLC) when I started my business. 

C Corporation and S Corporations require a corporate return, corporate minutes and give you the option to establish shares to sell for equity.  It sounded like a lot of high-cost record keeping work that I wanted to avoid.  Nobody likes to do paperwork. 

When I started, it was just me.  I didn’t imagine I would be anything else other than a consultant.  I thought I would be claiming all my income on my individual tax return Schedule C.   I wanted simpler taxes, so I incorporated as an LLC without consulting an attorney or accountant.  The State of Utah makes it so easy to incorporate.  It even generates the articles of incorporation for you.  Why would I want to do all that extra bookkeeping?

Then the next thing is filing with the IRS.  Here is where I made a critical error that almost prevented me from obtaining my 8(a) status when I first applied.  They classified me with my Employment Identification Number (EIN) as a Single-Member LLC.  Single-Member LLC was great until the SBA said an LLC is defined as one or more people and we cannot approve your application unless you get this changed.  I had ten days, I added my daughter as the other member, expedited the articles of incorporation, and our 100 percent Woman-Owned Small Business (WOSB) expanded to two people.  That was in 2009 when our 8(a) application was approved by the SBA.

Later, after participating in the Mentor-Protégé Program, we used a lawyer to convert DynaGrace Enterprises to an S Corporation to have the option to sell shares if we needed to raise capital.  Payment for government work can be delayed up to 90 days and as a company you have to carry that money and wait for the government to catch up.  You will get paid, but it may take some time. 

The main advantage to switching to an S Corporation was to minimize Social Security and Medicare taxes for myself and to limit my personal liability.  The profit and losses are still passed to me utilizing a K-1 form and reported on my individual return.   I didn’t choose to experience the double taxation that is the downside of the C Corporation.

When I started my business, Sole Proprietorship wasn’t talked about much but it is my understanding if you own 100 percent of your business this may be the option for you.  Again please consult an attorney or accountant to figure out the best choice.  

Remember in business, as in life, one size does not fit all.  

It can be expensive to convert to a different corporate structure later, but it is not a critical mistake, and change can mean growth but know the facts and make the best decision at the time.

Why start a government contracting business?

I have owned DynaGrace Enterprises, a Woman-owned Small Business (WOSB) and 8(a) firm for almost a decade.  So why did I start a government contracting business?  The answer is quite simple.  I was younger and dumber and wanted to see if I could.  I did not know what I should have known when I started.  Maybe this article can give you some insight and help you determine if it was the good idea you thought it was. 

There are several types of government contractors, and the one I am most familiar with provides services to the federal government.  The manufacturing part and being able to offer a product to the government might be better for you, but I am not as familiar with that type.

Federal government contracting can be a way to start a small business.  The market is worth over $100 billion in sales to small businesses each year.  Providing services or products to the government is quite different than selling to the commercial sector.

Government contracts can guarantee ongoing revenue to your business. A stable cash flow enables a business to develop marketing budgets, hire staff and grow their business intelligently. Reoccurring monthly business generated from government contracts can also hedge against months that are slow. In fact, many contracts have 3-5 continuous year contract terms.  Keep in mind though it can take 30 to 90 days to get paid.  But once the payments start you are usually fine.

The procurement process for a government contract is extensive.  You can speed up this process by marketing to government customers that have a budget.  That can be like finding a needle in the haystack.  The government goes through cycles for services.  Sometimes they ramp up contractors and some years they ramp up on civilian employees. 

You should be prepared for long hours when responding to solicitations.  The last couple I have lost to very low bidders.  I am not sure how they expect to give any benefits to their employees, but the government will get what they bid for, hence the term, “low bidder”.  It is like buying the cheapest vehicle and realizing the plastic cracks in the sun after a month of owning it.  I refuse to win a bid on the backs of my employees so the contract goes to a company that will.

The good part is I have some fantastic employees, and I have met some wonderful business people who are involved in government contracting.  I started out as a civilian employee way back when and then worked for about four contractors before starting my own small contracting business.  Having a small budget or lack of budget is a huge problem.  The government employees in charge of budgets are usually friendly and appreciate the services we have to offer. 

I would never even have thought about having my own business, and this opportunity has given me the experience and the pleasure of being an entrepreneur.  It is an excellent way to get started and the SBA offers some training but expect to learn a lot on your own and with the help of mentors.

Choosing a Company Name (DynaGrace Enterprises)

Choosing a business name can be one of the most difficult parts of starting a business because of the availability of the name or the domain.  The company I have had since 2006 had just gone through a trademark suit that could have been won with a lot of litigation.  I didn’t want to change the company name from Sensory Technology Consultants but because of the thought of expensive litigation we had to change.

I happened to find the domain available but only after extensive help from family and friends including a Facebook “Name my company” page.  For DynaGrace Enterprises, I went to Business Name Generator.  I started with my grandmother’s name, Olive Grace.  I was like how many companies have that name.  Well, it turns out a few have derivatives of that name.  But then I liked Grace.  Now I don’t share my middle name very often because my brother’s always used it when I tripped.  But now that I am an adult I love the name and think it is beautiful.

So what did I want to portray in my company besides elegance and grace?  Well, we aren’t dancers or ballerinas but I did want the feminine aspect in the name.  What would make it better?  How about a word meaning power or strength?  So I went to the Thesaurus and entered “power”.  I got several words, but one stood out, “dynamism”.   Then I went to dictionary.reference.com and looked up the word “dyna”.  The definition was perfect, a combining form meaning “power,” used in the formation of compound words. 

A quick search on domain names revealed that dynagrace.com was available, and DynaGrace Enterprises was born.  I felt incredibly lucky, and we had a meaningful name that combined into a great tagline, “Between POWER and GRACE lie EXCELLENCE.” 

Coming up with a name turned out to be the easy part.  After changing the name with the State of Utah, there were other things to consider especially in the realm of government contracting.  I will outline those steps in a subsequent blog article.

What is my story? (Today’s version)

I was glancing through my LinkedIn feed this morning and noticed Leadership Coach, Ken Sharrar, asking “What is your story?”

Hmmm…my story is always evolving.  I am a serial entrepreneur and of course ideas flow constantly.  Determining which of those ideas can be profitable is the question I always have.  But my entrepreneur story starts about ten years ago in a building at Hill AFB, UT where I was writing database software for the 84th Radar Evaluation Squadron (RADES).  I got hired as an Oracle DBA but was also a talented.Net programmer, so a few information systems became born or enhanced during my time there.  I love writing software and data has always been my thing.  I love getting information out of a relational database and formatting to fit what the user wants.  I was perfectly happy being a cube rat.

When I started at the RADES, I was just going through a divorce.  My husband had moved out the weekend before I started.  It was not expected although we had issues for a while.  So the first week I was in shock but also relieved.  So while my personal life was in strife, I had to turn my life around and take care of my three teenage kids so that their life was somewhat normal.  I poured myself into my work and managed to run the kids around to all their activities. 

I never thought about being an entrepreneur although as I look back I can see I had tendencies.  I sold things door to door as a child.  I had ADHD so my mom was constantly shoving me out the door, so I didn’t drive her crazy.  I wasn’t good in school until I was a teenager, and I always got good grades while being involved in FBLA, sports, and band.  I grew up in a penniless single mom household.  From meager beginnings came the experience in how to work hard to achieve results.

I was working in the RADES for about two years when I got the call that would change my career forever.  The call that came was from Vincent Kinsey.  He was working for IHS and was trying to integrate an RFID tag into a Hazardous Material system called HMMS at Edwards AFB in California.  As a single mom, I had to consider my family first.  Then I thought, I have skills, what would be the worst thing that would happen?  My kids might have to sleep on somebody’s couch for a month or two.  It doesn’t hurt children to experience hard times. 

I jumped in and became a sub to MECX, and Sensory Technology Consultants became born.  That was in June of 2006.  It is so hard to believe that I have worked for myself all of that time.  Sensory Technology Consultants has since become Dynagrace Enterprises and is a 100 percent women-owned small business and we are 8(a) certified.  My kids never slept on anybody’s couch, and I managed to give them an excellent lifestyle.

No matter what your story is, you can be successful.  Don’t let anything stop you and don’t be afraid to take risks.  Believe in yourself and your abilities and you will go far.

Mentors - Who is holding me accountable?

Starting a company is hard, so you're going to need a lot of advice along the way.  If you are like me, you have constant ideas flowing about a new idea for a product or service.  You cannot stop thinking so what should you do to execute at least one of these ideas.  

The answer is finding good mentors.  

I have had some excellent mentors that have held my hand, called my bluff, and gave me pros and cons of ideas.  These people are my personal board of directors that know me and can tell me the holes in my ideas.  Is it a good idea or not?  Is the idea profitable?

I recently read Keith Ferrazzi’s Who’s Got Your Back.  This fantastic book offers the advice to build more supportive relationships.  Ferrazzi provides a nine-step approach to creating what he calls “lifeline relationships,” an inner circle of trusting support peers who serve as advisors, cheerleaders, and accountability watchdogs. These mentors respect you enough to tell you like it is.  Ferrazzi invites you to “let others help.”  Your professional development means more when you let others help.

I have one mentor in particular that I hold a phone call with every two weeks to see how my progress is going.  He holds me accountable for my goals and especially my progress on these objectives.  We discuss strategic tactics and whether these goals are still working or whether we need to change the direction to adjust to changing environmental issues.  I trust him, respect him and he holds me accountable and we work through ideas and execution of those ideas.  In turn, I discuss what is going on with him, and we have a win-win situation where both of us profit both economically and personally.

Without my mentors in my defense contracting business, DynaGrace Enterprises, I would never have known how to organize my accounting records in preparation for a DCAA audit.  My mentors helped me prepare several technical and cost proposals for competitive solicitations and also helped me market my business to government clients.

Because of mentors I have been able to achieve my goals and make them faster because of my personal board of directors.  I suggest you start building that board sooner rather than later and your success knows no limit.