10 Mistakes Most Small Business Owners Miss When Starting Out

10 Mistakes Most Small Business Owners Miss When Starting Out

The process of starting a small business can be an arduous one; there are numerous steps that need to be taken — and often in a precise order — to legally establish a business. As a result, the process can be overwhelming. Unfortunately, it’s also easy to overlook some important details and steps along the way. By being aware of a few of the most common legal and compliance mistakes made by small business owners when starting out, you can be better prepared for future success.

  1. Misclassifying Employees as Independent Contractors

Regulators are coming down hard on misclassifications. The IRS estimates that this problem includes millions of workers. It is best to talk this through with an expert, but you can get some background on the guidelines at the United States Department of Labor website.

  1. Choosing the Wrong Business Structure

One of the first major decisions you’ll need to make in regards to your small business is the type of business structure you will select. This can range anywhere from a basic sole proprietorship (which doesn’t require any special forms or paperwork) to a more complex structure, such as a corporation or LLC. Keep in mind that different types of business structures offer different tax benefits and other protections, so it’s important to thoroughly explore your options and select the structure that’s best for your unique needs. You’ll also need to go through the legal process of establishing your business under your desired structure, which may require help from a legal or other type of professional.

  1. Failing to Apply for an Employer Identification Number

Unless you plan on operating your business strictly as a sole proprietorship (in which case, you will use your personal Social Security number when filing taxes), you’ll also need to apply for a unique Employer Identification Number (EIN). This number will be specifically associated with your business, and it can be helpful to think of it as a business Social Security number of sorts; it’s used to file your business taxes, open up dedicated business bank accounts, and the like.

  1. Overlooking Important Permits and Licenses

Depending on the specific industry in which your business will be operating and your location, you may also be required to obtain specialized licenses and/or permits in order to legally operate. Otherwise, you’ll run the risk of being shut down or finding yourself in serious legal trouble down the road. Take some time to research the specific types of permits or licenses that you may need to obtain, as well as the steps you’ll need to take in order to acquire them. Sometimes, this process can be time-consuming and even costly, so it’s not something you’ll want to put off until the last minute.

  1. Not Knowing When to Speak to a Professional

When starting up a small business, it’s not uncommon to run a one-man (or woman) operation. After all, you may not have the cash flow or even the need to hire outside help in the early stages. Still, when it comes to making sure your business is squared away from a legal/compliance standpoint, it can certainly be worth the money to consult with tax and accounting professionals early in the game. You don’t necessarily need to onboard these experts full-time, but being able to turn to them for advice and guidance when you need it will help you avoid serious legal issues later on.

  1. Putting Off Domain Name Registration

As soon as you have your business name picked out and registered, it’s also in your best interest to go ahead and register your website domain as soon as possible. Even if you don’t plan on setting up and launching your website any time soon, domain names are cheap, and having yours registered now will help you avoid a situation where the domain name you want is taken by somebody else later on.

  1. Lack of a Comprehensive Business Plan

One of the biggest mistakes small business owners make when first starting out is that of not having a well thought-out and articulated business plan. A business plan is an important document that outlines in detail what your goals for your business are and how you will achieve them. This document is important not just for you and other members of your immediate team, but for potential investors as well. Should you seek financing for your company at any point, an investor is going to want to see and scrutinize your business plan — and it will likely have a major impact on the final decision.

  1. Not Having Finances Squared Away

Another common mistake new business owners make is that of poor financial planning, which can lead to a lack of funding to get you through your first months successfully. Ideally, you’ll want to make sure your business plan accounts for all the company-related expenses you’ll incur during the first year of operation, as well as any personal expenses as well. Unfortunately, this is something that many small business owners overlook or miscalculate with disastrous results. The easiest way to avoid this mistake is to consult with a small business accountant during the early stages of drafting your business plan.

  1. Failing to File Patents on Products or Ideas

It’s (hopefully) no surprise that you’ll want to be proactive about filing for patents for any unique products, prototypes or designs you may have. However, what many small business owners first starting out don’t realize is that they’ll also want to file patents on ideas, such as intellectual property, that could otherwise be stolen or copied and used by other entrepreneurs. After all, intellectual property can be just as valuable as a product prototype — so you’ll want to plan and protect these kinds of ideas accordingly.

Be careful to also avoid the mistake of waiting too long to file for relevant patents; the process can often be long and drawn out, so getting started as early as possible will be in your best interest.

  1. Being Blind to Important Compliance Requirements

Last, but not least, make sure you’re aware of any and all compliance requirements that may apply to your business based on its structure, location, industry or other factors. For example, even if you’re keeping things “simple” by operating as a sole proprietorship, you’re going to be required to file and pay quarterly estimated taxes under that structure. Failing to meet compliance and other requirements can result in serious legal trouble, including fines and penalties, down the road.

When it comes to compliance requirements, such as annual reporting and tax filing, it’s always a good idea to keep a calendar of important dates, so you don’t forget anything. After all, you’ll have enough deadlines to worry about and remember on your own — especially during that first year of business operation. This is yet another situation where having a compliance expert, such as a tax or accounting professional, can really come in handy. He or she can assist you with annual compliance reviews, reminders on impending deadlines and the like.

From selecting a name and business structure to making sure your small business remains in compliance at all times, there are, unfortunately, a lot of opportunities to make mistakes as a new business owner. By keeping this information in mind and by working alongside the right types of professionals as you prepare to launch your new business, hopefully, you’ll be able to avoid these issues. From there, you can maximize your chances for success in the first year of operation and beyond.


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler Northwest is to earn our clients trust as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201

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Want to find some real savings in your budget? Cutting out lattes and avocado toast probably isn’t the way to go.

Housing, transportation and food: that’s what Americans spend almost 70% of their money on, according to the Bureau of Labor Statistics.

Sure, you can always cut back on extras, but it’s the biggest expenses where we bake a lot of fluff into our budget and call it “essential spending.” Take big swings at these big categories, financial experts say, and you’ll shake lose big chunks of money. Read more

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How do I create a long-term financial plan?

Article by Julia Carpenter | Found on CNN

Q: How do I create a lifelong finance plan and how much money will I need for all of those things? Emergency fund, wedding, buying a house, retirement, college savings for my future kids (how much do kids cost?), elder care for my parents (god forbid, but just in case)? –Delilah

Life is full of big-ticket purchases: moving expenses, school tuition, weddings, honeymoons, buying a house, kids, retirement … the list goes on and on.

You can’t plan for all these things, but you can decide what savings goals matter to you. Add them as line items to your weekly budget, and make a point of sitting down once a year to craft a financial plan for next year’s goals and expenses.

Your first goal should always be saving for retirement — even beyond the short-term expenses (vacations or other big purchases) that may feel more pressing year to year, according to Carrie Schwab-Pomerantz, senior vice president at Charles Schwab.

Retirement may not sound as exciting as buying a home or funding a honeymoon, but it’s important enough to warrant the No.1 spot on your priorities list every year.

As Schwab-Pomerantz points out, retirement is always going to be expensive — and it’s always going to be up to you to prepare for it. People often prioritize short-term expenses instead, or they decide to save for their children’s future before they save for their own.

“There’re no scholarships for retirement,” Schwab-Pomerantz says.

Her point: many of your circumstances could change. You could decide you want a small wedding. Your child could get a scholarship to college. But you’ll still need money when you retire.

Schwab-Pomerantz then recommends reevaluating your budget and financial plan every year, to decide what your next priorities should be.

Take the time out of your holiday schedule to make sure you’re adjusting the amounts you’re saving and spending. Have a bit more wiggle room this year? Up your contributions to your savings. Need to tuck away some money for a new car? Cut back on money spent on other things.

And remember: There’s no “one amount” to save for any of these goals. Instead, Schwab-Pomerantz recommends setting aside 10% of your income as savings. Adhere to that even as you earn more money with a bonus or a new job — you never know when you’ll need it.

“You know that your life is going to get more complicated,” Schwab-Pomerantz says.


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler NW is to earn our clients’ trust as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201

portland, accounting firm, northwest

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Working professionals can take a lot for granted about a job: the hours, the steady paycheck, the retirement plan. But serial entrepreneurs don’t enjoy such guarantees: They’re busy trading stability for the chance to build something new and valuable.

In my work running an investments/401(K) company, I’ve met many entrepreneurs who know this fact all too well. They wonder not only how to prepare for retirement, themselves, but how to make sure their employees are saving for the future, too. If you’re in the business of building a business and thinking about your financial future, here are some ways to assure retirement readiness for you and your employees. Read more

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The good news is, you don’t actually have to do much to get your finances under control. You just have to follow a few simple rules to streamline your spending and tackle all of your biggest money issues.

Here are five basic financial rules to live by that will change your life and put you on the path toward a more prosperous future. Read more

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