If you are thinking about starting a business, whether with a family member, partner, by yourself or with multiple friends or family, there are some important things to do and think about as you get the business up and running. Here are some of those things, and remember, speak with an attorney to get specific advice for your situation.
- Determine the structure and file appropriate documents with your Secretary of State
There are many forms a business entity can take, each with their own specific benefits and requirements. The simplest is the “sole proprietorship”. There are no corporate filing requirements and Schedule C of the 1040 individual tax return can be used to file taxes. General partnerships have largely been replaced by the common “Limited Liability Company (LLC)” and “Limited Liability Partnership (LLP)” options. As the names imply, these forms of entities provide more limited liability exposure while accomplishing the same thing as a general partnership. There are also the “Corporation (C-Corp)” and the “Subchapter S Corporation (S-Corp)” options. With the exception of the sole proprietorship and general partnership, the different types of entities require annual filings with the Secretary of State and have different tax rules. It is very important to speak with an attorney and a CPA to help guide you on what would be best for your company.
Whatever you choose, make sure you know whose responsibility it is to file any annual reports necessary to maintain your entity’s status.
2. Set up an Employer Identification Number (EIN) with the IRS here.
Open bank accounts with your new EIN and don’t use personal accounts. It makes the accounting so much simpler.
3. Determine how to keep track of your accounting. Review options such as QuickBooks or industry specific software. Who is going to keep track of your accounts – an employee or will you contract out for a bookkeeper? Many small businesses don’t have enough work to have a book keeper on staff and there are experienced bookkeepers who take work on a contract basis if that would be a good fit.
4. Decide if you going to accept credit cards, and, if so, what service will you use to process them? These days, with the ubiquitous mobile devices, there are many easy options.
5. Contract for appropriate amounts of liability insurance. If you are going to run a professional business, you will want to have malpractice insurance. If you are going to have an office, warehouse or any other type of business location, you probably want general liability insurance. Speak with an attorney and/or an insurance broker about the levels of liability typically purchased for a business like yours.
6. Keep any licensing and regulatory requirements up to date. This will be very industry specific and another reason to check with a business attorney to make sure you won’t be fined or held liable down the road.
7. If you are going to run the business with any sort of partner, put together an operating agreement. See our blog on essential provisions for operating agreements when you are running a business with your spouse.
Remember, these are just some of the things you need to do and consider when starting your own business.