The decisions you make
before your first dollar
are the cheapest ones.
Entity structure. Tax reserves. Quarterly estimates. These aren't scary — but they're much easier (and cheaper) to get right before you're operating than after you've had a surprise at filing time.
Where are you in your business journey?
Do these before you take your first payment
Five steps, in order
These aren't optional. Skipping any one of them creates problems you'll be cleaning up for years.
Get an EIN
10 minFree online application at IRS.gov. You need it to open a business bank account and file business taxes. Don't use your Social Security number for business activity.
Apply at IRS.gov →Open a dedicated business bank account
30 minAny bank works. Use it for every business transaction — income in, expenses out. Never run personal charges through it. This is the single move that makes bookkeeping manageable and protects your LLC status.
Open a tax savings account at the same bank
5 minMove 25–30% of every client payment here the moment it lands. Label it 'Tax Reserve.' Don't touch it. This is the Profit First move that eliminates the most common first-year crisis: a $12,000 tax bill with nothing set aside.
Set up basic bookkeeping
1 hourWave is free and good enough for most solo businesses. QuickBooks works if you want it to tie directly into your return. A clean spreadsheet is fine too. The tool matters less than the habit — log every transaction weekly from day one.
Wave (free) →Register for EFTPS and mark your first quarterly deadline
20 minIf you expect to owe $1,000+ in federal taxes, quarterly payments are required. Register at EFTPS.gov now so the account is ready before your first payment is due. Missing a quarter costs you a penalty even if you pay in full by April.
Register at EFTPS.gov →Cash management
Every deposit, split immediately
The Profit First system — three bank accounts, fixed percentages, no spreadsheets required. Every time a client pays you, move the money the same day. It's the closest thing to "set it and forget it" cash management for a solo business.
60–65%
Operating account
Pay all business expenses from here. If the money isn't in this account, you can't spend it.
25–30%
Tax reserve account
Touch this only to pay the IRS. Quarterly estimates come from here. Nothing else.
5–10%
Profit account
Owner distributions. Pull this quarterly — it's your reward for running a profitable business.
Percentages are starting targets for $0–250k revenue. Adjust as your income and expenses become clearer. Based on the Profit First method by Mike Michalowicz.
Entity selection
Which structure should you start with?
The honest answer: most new businesses should start as a sole prop or single-member LLC and revisit the S-corp question at $60–80k in annual net profit. Don't over-engineer it on day one.
Sole Proprietorship
Best for: Starting out, testing the idea, under $30–40k revenue
Start here by default. Change it when the revenue or liability risk warrants it.
Single-Member LLC
Best for: Any real business activity with liability exposure
Worth it for most service businesses once you're seeing real clients or revenue.
S-Corporation
Best for: Consistent profits above $60–80k/year
Run the calculator. If the net savings exceed compliance costs, elect it. Not before.
Calculator 1 of 2
What will taxes look like in year one?
First-year owners are almost always shocked by the tax bill. Two things make it worse than expected: self-employment tax (15.3% on net earnings) and no withholding. Enter your projected numbers to see what you'll owe — and exactly how much to set aside each month.
Your best honest estimate — use a conservative number
Pure service businesses: 10–25%. Product businesses: 40–70%. Don't include owner pay here.
Projected income
Self-employment tax
$8,478
15.3% on net earnings
Federal income tax
$4,653
After standard deduction
Estimated first-year tax bill
$13,131
Effective rate on profit: 21.9%
What to save
Per month
$1,094
Per quarter
$3,283
Move this to a dedicated savings account every time you get paid. Don't touch it.
Estimates only. Uses 2025 federal tax brackets and standard deduction. Excludes state taxes, QBI deduction, retirement contributions, and other adjustments. Partial-year calculations use prorated annual figures. Not tax advice — consult a CPA before making financial decisions.
Calculator 2 of 2
Do you have enough to start?
Most businesses fail for one reason: running out of cash before revenue arrives. This calculator shows you exactly how much capital you need — startup costs, the ramp-up period while you find clients, and a safety buffer for when things take longer than expected.
Rent, food, insurance, car, debt payments — what you need to survive
Equipment, legal setup, licenses, website, first month inventory
Software, insurance, supplies — recurring costs before any revenue
Cash you can actually commit — not retirement accounts or home equity
Monthly burn rate
$5,300
Personal + business
Monthly revenue to break even
$6,625
Cover burn + basic profit
Runway with available capital
4.7 months
After startup costs, before any revenue
Funding gap
Estimates only. Break-even revenue uses a simplified 80% profit margin assumption — adjust for your business model. Safety buffer uses 3 additional months of burn rate. Does not include loan repayment, investor returns, or tax reserves. Consult a CPA and financial advisor before committing capital.
Once you're up and running
These are the questions that come up in year one. Get ahead of them.
30-Day Business Setup Checklist
Week-by-week action plan: EIN, bank account, bookkeeping, insurance, and the CPA conversation you shouldn't skip.
GoWhich Bookkeeping Software to Use
Wave vs QuickBooks vs Xero — which one fits your stage and what your CPA prefers.
GoSE Tax & Quarterly Estimates
Understand your full tax exposure and build a quarterly payment schedule.
GoHome Office Deduction
Simplified vs actual method — see which one saves you more.
GoS-Corp Breakeven Calculator
See if an S-corp election makes sense at your income level.
GoYear-Round Tax Calendar
Every deadline you need to know as a self-employed business owner.
GoCommon questions
Should I form an LLC or just be a sole prop?+
For a service business with no employees and modest revenue, a sole prop is fine to start — it's zero cost and the tax treatment is identical. An LLC makes sense once you have real liability exposure (clients in your space, contracts, physical products, or anything that could generate a lawsuit). California adds an $800/year minimum franchise tax on LLCs, which matters at lower income levels.
When do I need to start worrying about quarterly taxes?+
Immediately. If you expect to owe $1,000 or more in federal taxes this year, you're required to make quarterly estimates. The first one is due April 15. Most people starting mid-year can skip Q1 but need to estimate Q2 through Q4. The safe harbor is paying 90% of this year's tax or 100% of last year's.
Do I need a business bank account if I'm just a freelancer?+
Yes. The IRS treats commingled funds (personal and business in the same account) as a red flag in audits, and it makes your bookkeeping a nightmare. A free or low-cost business checking account at any bank solves this. Open one before your first client payment.
What bookkeeping software should I use when I'm just starting out?+
Wave is free and covers most solo businesses well. QuickBooks Self-Employed ($15/month) works if you want something that ties directly to TurboTax. QuickBooks Online is the professional standard but more than most new businesses need until they're doing $150k+ or have employees. Whatever you choose, use it consistently — the software matters less than the habit.
I'm leaving a job to start my business. Should I start the LLC before I quit?+
Generally yes, though confirm your employment agreement doesn't restrict side business activity first. You can form the LLC, get an EIN, open a bank account, and start accumulating deductible startup costs while still employed. Just don't commingle W-2 funds with the business account.
Work with Matt
Ready to build a plan?
Starting right costs less than fixing it later. Entity selection, tax reserves, quarterly rhythm — a CPA can set this up in one conversation.
Tax services provided through Matt Reese, CPA. This page is educational and does not constitute tax or investment advice.