How to set up your business for long-term success

By Megan Carnegie

Photo by Jeremy Cohen, featuring Climate Town

Need a financial tune-up? Follow these best practices to streamline your accounting processes, assess your business's financial health, and work toward milestones.

As you grow your creative business, you might see your income fluctuate — and that’s totally normal. To have a clearer sense of the future and navigate rockier periods, it’s important to have a firm grasp on your financial stats.

In a recent live event hosted by Patreon, Noa Rodriguez-Hoffman, a Certified Financial Planner with Karat Financial, and Manuel Godoy, author and CEO of publishing company Black Sands Entertainment, share their tips for setting up your business for long-term success. Here, these experts delve into how to create a financial safety net, balance the books to help you scale and avoid burnout, and foster financial well-being.

Keep business and personal finances separate

When you’re first starting out and testing your business idea, it’s okay to use your personal account for payments. But as soon as you start making a profit, set up a separate checking account. Using a personal account to make business transactions will complicate your tax processes and require extra work, like combing back through all of your accounts at tax time, which can get expensive, too. “It can also lead to tax filing errors and even trigger tax audits,” says Noa. “And nobody wants to deal with a tax audit!”

It’s super easy to set up a dedicated checking account for your business. If you’re based in the U.S., you’ll just need your address, business name, entity type, type of business, and an employee identification number (EIN), a nine-digit number issued by the IRS to keep track of a business's tax reporting. If you’re a sole proprietor or a single-member LLC, you may be able to use your Social Security number.

When choosing a bank for your business, consider these questions:

  • Does this bank understand my business so that they can provide me with the level of service I deserve?
  • Are they FDIC or NCUA insured?
  • What level of customer service do they provide?
  • Do they have the capacity to serve my business’s transaction needs?
  • What fees do they charge?

Your future self will be grateful that you asked these important questions and created a clear line between business and personal finances.

Streamline your accounting processes

Once you have a separate checking account for your business, you’ll want to connect it to accounting software to save time and to stay on top of your finances. There are a ton of different options, including QuickBooks, Freshbooks, and Xero. These tools share many of the same features. A key difference is that FreshBooks doesn’t include any accounts payable features, but it does let you send invoices, accept payments, and manage your expenses.

Make sure that you categorize all your transactions correctly from the start because most software will start learning and auto-categorizing for you. “This lightens the admin load, so you're not forced to categorize every single input manually,” Noa says “Eventually, it starts to learn your patterns and categorize them for you.” You can also use accounting software to send out invoices and pay contractors automatically, which means you’ll get paid on time without needing to chase anyone down.

Find an accountant

Seek guidance from a tax professional, if possible, because they’ll know the right tax deductions for you. An accountant only knows the information you tell them, so make sure you inform them as much clear information as possible — including any relevant transactions completed outside of your business account —so they can run accurate reports.

Here are some tips for finding an accountant that’s a good match for you and your business:

  • Collect referrals: Use your creator network and peers to source referrals, or join Patreon’s Official Creator Community Discord server to connect with other creators.

  • Schedule a call: Once you’ve gathered details for a few referrals, connect with the accountants that feel like a good match to discuss their services.

  • Prep for your meeting: Before you meet, create a list of questions to ask:
    — What's their experience with creators or your particular industry?
    — Do they have any specialties?
    — What’s their fees breakdown?
    — How do they communicate with clients?

  • Meet: During your meeting, ask all of your questions to ensure your candidate understands your business, can provide advice on the most up-to-date tax strategies, and will maximize your deductions.

Take stock of your current financial health

To get a grasp on your current financial health, you’ll want to work with the following three reports:

1. Profit and loss statement

Also known as a P&L statement, this details your revenues and expenses for a period of time, such as a month, a quarter, or a year, and shows whether your business is profitable.

Tip: Compare revenue month over month and either cut unnecessary spending or strategize ways to increase revenue.

2. Cash flow statement

For more of an immediate picture, a cash flow statement tracks how much money came into the business and was paid out during a period of time.

Tip: Compare your profit and loss statement to your cash flow statement. If your profit and loss statement is positive, but your business is cash negative, then something is off. Review your transactions to make sure that they’re categorized properly. If nothing is wrong with your accounting, it might be time to rethink your money-making strategy.

3. Balance sheet

Also known as a statement of financial position, this details your assets, liabilities, and equity. Think of it like a net worth statement. Typically, banks will ask for this when they’re deciding whether to give you a loan or credit. Some will require two years’ worth of statements plus tax returns.

Tip: Some banks may not understand the unique challenges of running a creative business. As a result, you may be denied credit or given a low limit — even if your profits and loss statement shows profits and your business is cash flow positive. If you’re looking for an alternative to traditional banking, Karat offers a business credit card built for creators.

Prioritize paying down debts

Understanding the relationship between your P&L and cash flow statements can inform important strategic business decisions, including the best way to pursue growth. Any accounting system or accounting professional should be able to get you these statements. If you have "toxic debts" — debts between $25,000 and $100,000, with a six- to 18-month term and an interest rate of 8-12% — work on paying them off first. Then set aside some money to start funding your business.

"Remember sweat equity: All the things you can do for the business yourself without spending a dime."

Starting a business with toxic debt won’t set you up for success, since the debt will likely snowball. Look for a good medium where you're paying off those debts, while getting a plan together to put some money away for your business. Remember sweat equity: All the things you can do for the business yourself without spending a dime.

Understand the pros and cons of business entities

Now it’s time for the big question: to incorporate or not to incorporate? “Typically people jump to setting up an LLC first,” says Noa. “But there's no point setting up an LLC if you haven't turned a profit yet.”

Keeping on top of your numbers will help you determine the type of business structure that best suits your needs. One of the pros of setting up an LLC (or limited liability company) is legal protection. For example, if your business gets tangled in legal troubles or a lawsuit, the plaintiff or creditor can only go after the business's assets, not your personal assets (as long as you’ve set up the business correctly, have kept good records, and haven’t commingled funds). You can also make some serious tax savings by choosing the right business entity.

Here are two common types of business entities for creators:

LLC taxed as a disregarded entity


  • Fast, easy, and relatively inexpensive to set up
  • No corporate tax return to file
  • Can have unlimited “members”


  • Must pay self-employment tax (15.3% in 2022) on all income generated

LLC taxed as an S-corporation


  • The business pays your salary and the payroll taxes on it
  • The rest of the income is distributed as dividends. This may also save you money, since dividends are taxed at a lower rate than income.


  • Can be more expensive than and time-consuming to set up due to reporting requirements
  • Might need an accountant to help calculate a reasonable salary
  • Can’t have more than 100 shareholders

Once you reach a certain level of income, you can elect to be taxed as what is called an S corporation. This is your way of telling the IRS that you want your business to be taxed as a corporation rather than as a pass-through which is a sole proprietorship. Once your business reaches $75,000 in annual revenue, you could save up to $6,000 in taxes just by electing to be taxed as an S corporation.

For more details on which business structure makes sense for your situation, read 5 ways to structure your creative business.

Stay focused on your mission

Manuel has developed a framework for sustainably growing a creative business that he calls “the 1,000 Rule.” This system centers around having a clear roadmap. As Manuel says, “Never stray from the mission.”

The 1,000 Rule centers on these milestones:

  1. Attract 1,000 fans on social media
  2. Earn $1,000 on your platform of choice, such as Patreon
  3. Sign up 1,000 people to your email list
  4. Reach 1,000 orders or subscribers
  5. Bring on board 1,000 investors

When Manuel started building his publishing business, he established five goals: 1) “dominating” Instagram, 2) becoming a subject matter expert in his niche, 3) sharing his expertise widely, 4) spending money on quality content production to stand out from the competition, and 5) being approachable to his fans. Then he used the 1,000 Rule to prioritize and start striving toward each one of these areas.

Once you’ve completed one milestone in Manuel’s framework, he recommends starting to work on the next one right away. “This is not a fast process,” Manuel says. “By the time I hit number five, I was probably four years in. But by the time you hit goal number four, you will be 100% financially independent as a creator.”

This article is based on strategies discussed in the session "Own Your Financial Wellbeing with Karat," as part of #OwnYourGrowth, Patreon's 2021 series of live, online events on how to grow your creative business without burning out. It’s not intended as financial, business, or legal advice; seek a professional for personalized guidance.

To join a future workshop, explore Patreon's upcoming events for creators.

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