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The Basics of Starting a Business: Preparation
All of the people vital to the success of your business aren’t going to be industry gurus, sales and marketing geniuses or technology wizards. Some will be the people that understand the business side of the equation.
Once you’ve decided to go into business, there are certain administrative steps you need to take in order to get started on the right foot. Missteps here can cost you a lot of time and money later on. Do it right from the start and your entrepreneurial journey will be much easier. There is nothing more self-destructive than having to unwind a big administrative mess when you should be out growing your business.
All this assumes you have a business plan that has been critiqued by others and qualifies as a legitimate and sustainable business. You will have to spend some money establishing the groundwork for your new business and there’s no sense in doing that if you haven’t qualified your concept.
First order of business is to find an attorney and an accountant. Yeah, I know, you’re going to find all you need to know on the internet on the cheap or for free. Starting a business is serious stuff and you need to do it right.
Studies have shown that successful entrepreneurs excel in surrounding themselves with people that are vital to the success of their business. These are people that bring skills and knowledge that you do not possess yourself in order to satisfy all of the needs of your business. Your initial consultation with an attorney or an accountant may be free or discounted.
Depending on the nature of your business, you may also want to consult with a intellectual property rights attorney. If the value of your business is in your unique designs in the form of art, technology, designs etc., you will want to protect it. If you worry about protection after you’ve done something clever, it may be too late.
Name Your Business
You will need to have a name for your business. Sometimes your legal entity name will not be very descriptive of what it is you do and not be keyword rich. In that case, you may have another name or names that are DBAs (doing business as). You can check these names out in the states where you will be doing business to see if they have been previously registered. You can do this yourself through most state government websites. Access links to the Secretary of State or the Department of Revenue and do a search on the name you want to use. You can also check with the U.S. Patent Office. Once you’ve identified a name you can use, it’s time to talk to your experts.
Place of Business
You will also need to decide what your business address and phone number will be. Most entrepreneurs start their business in their home. This is not always the best place to have your business mail delivered or for business calls to arrive to. There is an inherent lack of privacy, once you’ve told the world where you live and have made you home your office.
It is often far better to have a virtual office as your business address and phone number. Some of the benefits are:
- You achieve a degree of separation of your personal and business life
- You don’t confuse your business mail with your personal mail
- Someone is always there to receive packages
- Your clients don’t call your home at all hours unless you want them to
- A person will always answer your phone calls without the background sound of dogs, children and spouses
- You determine if you are in a position or are prepared to take the call
- You will have a professional place to meet clients when necessary
- The cost is nominal
It is now time to officially establish your business. You will need to discuss with your experts, what form of legal entity you should choose. You can read up on the meaning, pros and cons of each form on as many websites as there are stars in the universe. What the web will not be able to tell you is which is best for you depending upon your current situation, the nature of your business and your plans for the business. Changing the form of the legal entity in the future can be a very unpleasant task, so good advice is worth its weight in gold.
Your attorney can draw up the required documents. Again, I understand, all of your friends started their businesses and don’t have any of these documents or used fill in the blank forms off the internet. How many of them have businesses that are worth $1 million. If you have partners/co-investors or plan to, this can get complicated. Your partner may be your best friend today, but you never know what the future may bring.
Resistance is futile. You will be taxed, regulated and administered by the federal, state and local government. Failure to comply can be costly. In addition to the documents required for your particular legal entity type, you will need to file:
- State and local business licenses
- Any required specialty business licenses
- IRS legal entity election form
Once you have filed all of the necessary paperwork for your state business license and your IRS election form, you will be assigned a state identification number and Taxpayer Identification Number (TIN) by the IRS. These numbers will be necessary for the other paperwork and filings.
- IRS employment forms
- Personal property affidavits for the county
- Employment eligibility forms for Home Land Security
- Department of Social and Health Services new hire reporting
- Possibly others depending upon your location.
The point is, when it comes to government requirements, most of us don’t know what we don’t know. Use an expert. They can tell you exactly what you need to do and you can accomplish most of it online.
Work with an accountant to discuss your bookkeeping needs. An accountant can give you guidance on setting up your chart of accounts. If you don’t know what a chart of accounts is, the accountant may suggest bookkeeping services. You will probably need accounting software and perhaps, depending upon the nature of your business, specialized project tracking or invoicing software.
Even if you don’t have employees, your form of legal entity may require you to pay yourself. In that case you will probably want a payroll provider. This not only makes it easier to get the checks out, but takes care of all of the necessary state and federal filings. Yes, the paperwork never ends.
Even if you don’t have any employees when you start. It is probably a good idea to have an employee manual so you never forget when the time comes. With the amount of employer/employee litigation today, you need to document the relationship your business has with employees.
This is less of a step by step manual on how to start a business and more of what is hopefully an eye opener as to the complexity of starting a business the correct way. If you’re serious about your business then you will want to make sure you get started in a way that protects your future. The need for expert advice at this stage is critical so let me repeat the conclusion of a Princeton study on entrepreneurship:
Successful entrepreneurs are skilled at using their time to develop relationships with people vital to the success of their business.
In the words of Clint Eastwood; “a man’s gotta know his limitations”. All of the people vital to the success of your business aren’t going to be industry gurus, sales and marketing geniuses or technology wizards. Some will be the people that understand the business side of the equation.
Learn more about the author, Richard Gabel.
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- starting a business
- business plans