How To Set Up A Business
Here are some general tips on starting a new business.
1. CHOOSE A LEGAL BUSINESS FORM:
The three basic legal forms are sole proprietorship, partnership, and corporation. See “Types of Business Entities”.
2. CHOOSE A MAILING ADDRESS:
Having a stable address ensures you get all your mail including tax filings, state notifications, and customer requests. Think of using a Post Office Box or a UPS store box if you plan on receiving packages. Having a mailbox keeps things simple, efficient, and organized, a very important key to success.
3. PICK A BUSINESS NAME AND REGISTER IT:
If the business name you choose is different form your legal name, file an assumed (or fictitious) name certificate with the county. You are notified if another business already has that name, so you can select a new one.
4. WRITE A BUSINESS PLAN:
A good business plan should include a description of what you are selling, who the prospective customers are, how you plan to promote, and how much money is need for start-up costs. This will help keep you on track during periods when business is not flowing in as you expected.
5.SET UP RECORD-KEEPING SYSTEMS:
Put together a simple and effective bookkeeping system for income and expenses. Something as simple as using a pocket divider for each month's receipts, bank statement, deposit tickets, and canceled checks. Using a scanner and organizing a few folders on your computer is another method. (the Brother printers listed under “Order Supplies” come with a very easy to use software called PaperPort that makes scanning fast, easy, and organized)
6. APPLY FOR YOUR (EIN) EMPLOYER IDENTIFICATION NUMBER:
- Toll-Free Telephone Service: Taxpayers can obtain an EIN immediately by calling the Business & Specialty Tax Line (800-829-4933).
- Apply by Fax: FAX the completed Form SS-4 application to their state FAX number (visit www.irs.gov), after ensuring that the Form SS-4 contains all of the required information. If the taxpayer's fax number is provided, a fax will be sent back with the EIN within a few business days.
- Apply for and EIN Online by Visiting www.irs.gov
7. OPEN A BUSINESS CHECKING ACCOUNT:
Call several banks to find out what services they offer. Bank fees can be significant, so shop around for the best deal. You typically need $100 to open a business account. One with on-line banking might be better to go with for ease of generating reports for taxes.
8. OBTAIN ALL LICENSES & PERMITS
It's very important not to overlook any necessary license or permit requirements for your state. Some cities and counties require a general business license. If the product or service you sell is taxable, you need a state sales tax permit. Visit your states Department of State online for additional information. Example: for FL go tohttp://www.dos.state.fl.us/startbus/index.html for other states, check you local state website
9. GET YOUR SUPPLIES IN ORDER
As a business owner, you will need to organize yourself to ensure you are able to effectively work throughout your day. This means having the simple items such as Business Cards, a Printer, a fax machine, a scanner, copy paper, a letterhead template, a phone line, a fax line, maybe even a website
10. START MARKETING YOUR SERVICES
Having a great service to offer isn’t enough. You need to announce to all industries that you are out there. Marketing is a very crucial part of success. Use things like Flyers, Postcards, Newspaper Advertising, web banners, and most importantly word of mouth. Take flyers to people who have contacts in the industry. For example, automotive sellers see people everyday and turn away people who can’t finance due to their current credit situation. Show that person with your service you can help the customer as well as the salesperson.
These are just our suggestion on starting up a business for the first time. You may have your own method or know someone with more experience. We simply offer this for those who don’t have the time to research this themselves.
Definition of Types of Business Entities
BELOW ARE THE VARIOUS TYPES OF BUSINESS THAT YOU CAN FORM AND A BRIEF EXPLANATION OF EACH. YOU SHOULD CHECK YOUR STATE’S LOCAL WEBSITE FOR DOING BUSINESS IN THAT STATE AND THE REGULATIONS YOUR STATE HAS IN PLACE.
(This is only for general reference. Check for any changes by your state)
A sole proprietorship is the form of business entity with the least amount of legal formalities. In a proprietorship, the owner assumes sole responsibility for the operations and finances of the business, including profit and loss. In the proprietorship form of business entity, the owner’s personal property is tied directly to the business; therefore, the owner assumes unlimited risk of his personal assets.
“C” Corporation (C-Corp)
Corporations are a separate entity from its owners. Corporations provide the shareholders with the most protection from liability and responsibility from debts and contracts. Profits for a corporation are taxed at the corporate level when the income is earned and is also taxed at the individual shareholder level.
"S" Corporation (S-corp)
An "S" Corporation is similar to a corporation in that it provides its shareholders with protection from liability. However, unlike a corporation, an "S" corporation is exempt from federal income tax. Instead the taxes are paid solely by the individual shareholders.
General Partnerships require an agreement between two or more individuals or entities to jointly own and operate a business. Profit, loss and managerial duties are shared among the partners, and each partner is personally liable for partnership debts. Partnerships do not pay tax, but must file an informational return, while individual partners report their share of profits and losses on their personal return. Short term partnerships are also known as joint ventures.
A limited partnership is a form of business organization that offers some of the partner's limited liability. It consists of a general partner who organizes and manages the partnership and its operations, and limited partners who contribute capital but have limited liability and assume no active role in day-to-day business affairs.
Limited Liability Partnership (LLP)
LLP's are organized to protect individual partners from personal liability for the negligent acts of other partners or employees not under their direct control. LLP's are not recognized by every state and those that do, sometimes limit LLP's to organizations that provide a professional service, such as medicine or law, for which each partner is licensed. Partners report their share of profits and losses on their personal tax returns. Check with your Secretary of State's office to see if your state recognizes LLP's and if so, which occupations qualify.
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is a combination of the corporate and partnership forms of business. In an LLC, parties control shares of the company and like corporations, and their liability for the operations of the company is determined by their level of investment. However, like partnerships, income tax is not paid at the LLC level, but rather it is "passed through" and taxed at the shareholder level. This somewhat complicated form of business entity should be discussed further with an attorney or accountant to determine if it will fit your needs.
Each of the above has legal, tax, and practical consequences that may require the advice of an attorney and/or CPA.