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Every day, entrepreneurs all over the world take a leap of faith and launch their own businesses. And, whether you are making candles or forming an accounting firm, the basic processes to get your business off the ground and running, will remain the same. Here’s a checklist of everything you’ll need to do to transform your dream into a fully formed business.
1. Select a Name
The name of your company is a more personal choice, but one that you’ll have to live with for a long time. It’s a very personal experience, and there aren’t really any rules or requirements to follow. Think about what your prospective clients or patrons are interested in or the solution you’re solving, and go from there.
2. Decide on A Legal Structure
Everyone who wants to start a business will have the same 4 choices when selecting a legal structure. Your business structure will dictate many of the important processes once you’re open, so take the time to learn about all of them before you decide which is best for you. You can learn more about them here.
Legal Structures:
– Sole Proprietorship
– Partnership
– Limited Liability Company (LLC)
– Corporation or S-Corporation
Once you’ve chosen the proper legal structure for your unique situation, it’s time to make it official. To do so, you’ll need to be in touch with both your local Secretary of State office and the IRS. Each state has different requirements for forming a business entity, so depending on where you’re starting your business, making it legal will be a different process. Companies, like BetterLegal and others, are making this process much easier by providing an online space to form a business entity. All you need to do is give them your information, and their team will take care of everything else.
3. Write A Business Plan
With your new name and legal structure in mind, craft a preliminary business plan. It doesn’t have to be a rigid, official document. This should act as a guide through the startup phase and help you navigate any potential challenges. It can be as simple as a one-page outline or it can be something more complicated.
All you need to have a complete business plan is a document that houses your business goals, how you plan on attaining these goals, and the timeframe in which you will do so. Of course, if you want to draw up something more extensive and formal, you can go into much more detail.
4. Obtain Your Employer Identification Number
If your business is a Corporation, LLC, or Partnership (or a sole proprietorship with employees), you’ll be required to apply for an Employer Identification Number (EIN), sometimes referred to as a Federal Employer Identification Number (FEIN).
You’ll need an EIN to open a business bank account, process payroll, and later, file taxes with the IRS. It acts as a social security number for your business. You can learn more about what an EIN is and how to get one here.
5. Open A Company Bank Account
Mixing your personal finances with your business’ finances will only complicate things. Opening a company bank account is an important step in the business formation process. This helps to protect your own money while making it easier to keep track of your business books.
It’s always a good idea to contact your bank about opening a new bank account. Each bank will have different requirements for what they need to open a business account, with some having more stringent rules than others.
6. Obtain Licenses & Permits
Federal Permits
This step will only apply to certain businesses, but for those that it does apply to, it’s an absolutely crucial step. You’ll need to apply for licenses and permits before you can open, so start the process as soon as you have everything you need to do so.
Businesses That Require Federal Licensing:
- Investment advising
- Drug manufacturing
- Food Preparation or Handling
- Broadcasting
- Transportation (Ground)
- Selling alcohol, tobacco, or firearms
Something else to consider is any state licenses or permits. Things like selling alcohol or firearms require special permits in all states. While regulations for other professionals, like building contractors or physicians, will vary greatly from state to state. Below is a list of common professions that demand specific permits. However, this is not a comprehensive list, so csheck with your local governing office to determine whether you need special licensing or not.
Businesses That Require State Permits:
- Banks
- Insurance Carriers
- Appraisers
- Accountants
- Barbers
- Real Estate Agents
- Private Security Guards
- Funeral Directors
- Bill Collectors
- Cosmetologists
Sales Tax Permit & Business Licenses
If your business will be selling physical products, you will most likely be charging and collecting a sales tax. And, in order to do so, you’ll need a State Seller’s Permit or Resale Permit. Businesses that offer services are not typically required to charge a sales tax, but it’s always a good idea to double-check your local laws to make sure.
In addition to state and federal licensing and permits, you also need to consider city and county permits. In most cases, you will be required to obtain a business license, even if you only plan on operating out of your home. A business license will grant you the authority to do business in your local city/county. Ecommerce and similarly based businesses are often the exception to this rule.
7. Get Business Insurance
Aside from legally separating yourself and your personal finances from the business, business insurance is the best way to protect your assets. There are several different types of business insurance available, and the best fit for your company will depend largely on how you operate and what you do.
The most common type of business insurance is typically referred to as “General Business Insurance” or a “Business Owner’s Policy”. This will cover everything from individual product liability to company vehicles. However, in special cases, you’ll need additional protection. For example, a general contractor might want special insurance for their tools and equipment, while an eCommerce business would likely want to invest in a form of cybersecurity insurance.
8. Establish A Record-Keeping System
No matter what type of business you’re forming, you’ll need a designated method of accounting and record-keeping. You always have the option to hire a CPA or financial consultant, but that’s certainly not a requirement. You can also use bookkeeping software or something similar. But, the important thing is that your records are accurate and organized.
Company documents, such as a list of owners and addresses, annual reports, financial statements, tax & corporate filings, etc, are required to be kept for at least three years. However, it’s always a good idea to have these documents easily accessible, in case of any problems.
9. Create Your Brand Identity
This can be done by you or a professional graphic designer. Creating a brand identity is about assigning visuals to your specific business. Most entrepreneurs start with a logo and go from there. The most important thing is to make sure that your brand identity aligns with how you want others to view your company. Once you have determined your brand identity, order business cards, letterhead, and promotional materials for your business. These material items will help add credibility to your new business and make it appear more established.
Starting A New Business
If you have everything on this list covered, you’re already in an excellent spot. However, most businesses aren’t formed in a perfectly neat, chronological schedule. You might have some things already taken care of and others that still need to be done. And, of course, starting a new business is different for every entrepreneur. This should be considered as a starting point. If you take care of everything we discussed here, you are well on your way to running your own business.
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