So,
you're thinking about starting your own business? But you
feel extremely overwhelmed and don't know where to start?
Don't worry - every business owner has gone through the
same experience as you, me included. While it can seem overwhelming
at first, if you break the process down step-by-step, it's
not as daunting as it seems.
These
are some of the basic steps you need to follow when starting
your own business:
1.
Talk to your accountant about the right business entity
for you.
There
are quite a few business entities to choose from which can
just add to your confusion:
C
Corporation
S Corporation
Limited Liability Company (LLC)
Limited Liability Partnership (LLP)
Limited Partnership (LP)
Sole Proprietorship
General Partnership
So which
one are you supposed to choose for your business? Your accountant
will be able to tell you which business entity will best
suit your tax needs.
This is a very important
step, so don't skip it because you don't want to pay for
your accountant's time - the IRS will end up coming back
to haunt you in the future!
2.
Consult an attorney about your business entity as well.
The
entity your accountant chooses for your business might be
best for your tax needs, but will it also protect you from
any future legal liabilities? Will your family's home and
assets be protected from any future lawsuits?
It's
very important to discuss this matter with an attorney to
make sure you and your assets will be protected from any
future legal claims filed against your company. So many
people make the mistake of not consulting an attorney because
they just don't want to spend the money on one. Then - WHAM!
- the business gets sued and they stand to lose all of their
personal assets. By this time, it's way too late for an
attorney to help out.
The
$200 or so you'll pay for your attorney's time will potentially
save you thousands of your hard-earned dollars in the future
that you'll need to defend a lawsuit. This will prove to
be money well invested for you.
3. Choosing
a business name.
While
this step may elicit a "duh!" comment from some
readers, it can actually be more difficult than you might
think.
You
need to think carefully about the name you choose for your
business since you'll be stuck with it for awhile. Try to
think of a name that will describe what your business is/does,
and one that will stick in people's minds. I recently heard
about the non-profit "Cancer Schmancer Movement"
(cancerschmancer.org)
on the radio, and I can't get that name out of my head ever
since!
Try
not to pick
a name that will be too controversial (offensive, risque.
etc.) as it may cost you potential customers and may create
legal problems for you in the future.
4. Check your state's
records to make sure your business name isn't already taken.
There's
nothing worse than coming up with a brilliant company name,
getting business cards, etc., just to find out that the
name is already in use by another company! So how do you
avoid this situation? Well, thanks to this wonderful little
invention called "The Internet", it's super easy.
Just
enter the name of your state and the word "business"
into a search engine and you should see links to your state's
Secretary of State Department (or similar entity) web site.
Typically, you can do an online search on your state's web
site. to see if the name is available. If it is available,
fill out the necessary application to register your company's
name. There is usually a fee associated with a business
filing.
If you
don't feel comfortable doing this step yourself, an attorney
can do it for you.
5. Apply for
a Federal Employer Identification Number (FEIN):
Once
your business is registered with your state, you will need
to apply for a Federal Employer Identification Number. What
is that, you ask? It's basically a social security number
for your company. This identification number is how the
IRS will track taxes for your business, along with any employee
issues associated with your business.
You
can apply for it at irs.gov.
There is no fee for this application.
6. Apply for
a Sales Tax Exemption Certificate (if applicable):
If you
will be collecting state sales tax, you will (more than
likely) have to obtain one of these certificates. It will
be your responsibility to collect sales tax from your customers
and submit those taxes to your state's Department of Revenue.
You
can visit aicpa.org
to find a link to your state's Department of Revenue.
There may be a nominal application fee involved.
7. Get your
business licensed and insured (if applicable):
Depending
on what type of business you are starting, you may need
to have the business licensed and insured. Examples would
be a landscape maintenance company, plumbing company, electrician,
etc.
Check
with your state's business department for the necessary
requirements and procedures.
Continue
to Page Two
