Five Steps to Starting a Small Business
Starting the business can be a rewarding experience, but it can also be very time-consuming and demanding. Many funds are available to help you, but information overload can produce you from moving forward.
Keeping it minimal is regularly the best way of maintaining the momentum essential to get your sphere ongoing. There are five steps to guarantee sensation.
- Name your business
- Get licenses and permits
- Obtain an insurance
- Recognize business taxes
- Hire employees if necessary
1. Name your business
The first step toward getting your business going is deciding on a name. When selecting a name, try to make the name short, easy to remember, descriptive of the business, and capable of drawing attention. First you’ll need to decide which business structure you will use, and there are specific rules and requirements for each of business types - sole proprietorships, partnerships, limited liability companies, and corporations. Find out more about how business structure affects your business name.
Any name that you do business under other than your own given name is called a “fictitious” or “assumed” name, and certain steps need to be taken in order for you to do business under that fictitious or assumed name.
Depending on where you live, different government agencies track which names are available. Look in your local phone directory, under government agencies to find the number, or contact your local Secretary of State.
Definityly, you can only choose the business name that is not already registered. If the name you want is available, you may need to file a fictitious or assumed name certificate with the state or local fictitious name office. Some areas will also require you to publish a notice in the local paper about your new assumed name. Both state and federal law regulates the use of names and “trademarks”.
To avoid conflicts with other businesses regionally or nationally using your business’s name, or the names of your products, you may want to consider registering your trademark through Secretary of state offices.
2. Get licneses and permits
Different areas have differing licensing and permit requirements depending on the type of business you are going into. Most businesses that require a license will have a local licensing authority that can guide you through the process.
Find out the licensing requirements on federal, state, and possibly even local levels for your type of business and get licensed. Failure to be properly licensed could result in penalties such as fines, closure of your business, and imprisonment in some cases.
3. Obtain an insurance
When things are going smoothly, insurance can seem an unduly burdensome expense on a small business. But when things go wrong, whether or not you have insurance can mean whether or not you and your
business survive a catastrophic event like a lawsuit, fire, or natural disaster.
Liability insurance protects you against liability in the event of injury to others or damage to other persons property. Liability insurers most often have two duties:
1. The duty to defend you. Hire a lawyer, if you get sued and
2. the duty to indemnify you. Pay for damage or injury to others. Both duties are extremely important, but the first is often overlooked by small businesses.
The cost of defending a lawsuit can easily run into the tens of thousands, or even hundreds of thousands of dollars even if you win. That’s why being careful is no substitute for liability insurance.
Make sure you have adequate coverage for your vehicles and those of your employees when used for business purposes. You can be sued and held liable for injury or damage done by your employees if it is within the course and scope of their employment.
Property and theft insurance may be an important consideration, as well as product liability or service
liability insurance. This is often called “errors and omissions” coverage.
4. Recognize business taxes
Depending on the structure of your business, you need to understand and recognize what taxes you must pay and how you pay them. Sole proprietors need to be conscious of local, state and federal taxes and registration requirements relating to their businesses.
Hiring an accountant or bookkeeper to help set up a simple accounting system, or using a software package is a good place to start.
Hiring a tax professional knowledgeable about local and state taxes relating to your business, or contacting the local tax authorities before you begin generating revenue or expending money can help you stay organized and be ready for tax time.
Additionally, the IRS offers resources how you should manage your taxes based on 4 general type of business taxes - Income Tax, Self-employment tax, Employment taxes and Excise tax.
For entrepreneurs starting a small business in various publications, you can find out more about business taxes via IRS website.
- Publication 334 (2007), entitled “Tax Guide for Small Business”
- Publication 583, entitled “Starting a Business and Keeping Records”
5. Hire employees if necessary
The fifth step is hiring employees (if needed). Though many small business people start out running their own shop, success will often bring the need for expansion. When an employee is added, you must obtain an Employer Identification Number from the IRS. Download Form SS-4 Application for Employer Identification Number.
In the United States, the Workers Compensation scheme does a lot to protect employers from lawsuits by employees injured on the job, while also providing employees with easier compensation for workplace injuries. Be sure to talk to your insurance broker about workers’ compensation insurance.
Talk to your tax adviser, and make sure you register with your state for payment of unemployment compensation taxes.
Download Form W-4 Employee’s Withholding Allowance Certificate from the IRS web site to take care of employee withholdings. You should get copies of INS Form I-9 to verify your employees’ eligibility for employment in the United States.
Finally, issues regarding wrongful termination, discrimination, workplace harassment, and other legal issues have come to the forefront in today’s business environment. Make sure you have an employment agreement
that spells out whether your employee is “at-will”. ex: can be let go at any time without cause, or the terms of the employee’s contract for employment.
Sometimes, hiring independent contractors is often a good way to avoid the administrative burdens of hiring employees, but be precautious. There are many pitfalls to hiring an independent contractor, talk to a lawyer and your tax advisor about who is an employee versus a contractor.
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