Make Your Business Official – First 10 Things To Do
By Janet Kramer, CPA
Please note: Janet Kramer is an accountant who specializes in helping small businesses. Her CPA firm is located in the Denver metro area.
Okay, you’re ready to launch your own small business, or maybe you’ve already opened, “unofficially.” You have a fantastic idea, you know you can make money off it, maybe you’ve even completed a few sales “under the table” or practiced your trade or service for free. Now’s the time to take the next steps, to become official. Here are the first ten things you can do to get off to a good, clean start.
1 ) Choose a legal entity
Before you can do anything else, you’ll need to decide the legal structure for your business. Will you be a sole proprietor, partnership, or corporation? This determination usually boils down to questions of legal protections and tax advantages. Don’t make the choice impulsively. Check with a lawyer and/or accountant before making this decision.
2 ) Name your business
Choose a name that fits your business, one that’s not being used by another business. As tempting as it might be to select something distinctive, be careful. Don’t opt for a name that’s too cute or complex, and make sure people can pronounce and spell it correctly. Avoid naming your company after a product, service or location, unless you’re positive these will never change. Ask Boston Chicken, later Boston Market, about the high cost of naming blunders.
3 ) Register your business
Check with your local and state governments to see what’s required of you to properly register your business. For example, in the state of Colorado, you’ll head to the Secretary of State’s to file papers.
4 ) Get in compliance
Make sure you’re in compliance with all of the business licenses, permits, and regulations required in the area in which you’ll be conducting business. The most common requirement is sales tax collection. If you plan to sell or resell any type of tangible product, you’ll need to set up an account to collect and remit sales tax. In Colorado, you do this at the Colorado Department of Revenue.
5 ) Choose and reserve a domain name
Even if a website isn’t in your immediate plans and might never be, reserve a URL anyway. Who knows what impact the Internet might have in another five years, and by the time you discover the power of it, all the good names will be gone. You can search for available names (including combinations of words) at www.nameboy.com. Once you’ve selected a domain name, you can register the URL at www.godaddy.com or www.register.com for less than ten dollars. When choosing a name, .com remains the gold standard. Whatever you do, however, don’t choose .net or .org if you’re not a network provider or organization, as those designations, right off the bat, will mislead your potential customers or clients.
6 ) Apply for an EIN (Employee Identification Number)
If you’re a corporation or any type of legal entity that hires employees, securing an EIN from the federal government is a requirement. While an EIN isn’t necessary for one-person businesses with no employees, it’s still a good idea to request and begin to use one anyway. Otherwise, everything in your business will be tracked through your own social security number, which means you’ll be giving that number out constantly.
7 ) Open a business checking account
Take your official business registration papers and open a business checking account at your local bank. Choose a branch that’s close by if you’ll be making frequent deposits, and inquire about lines of credit, even if you have no intention of borrowing money.
8 ) Set up bookkeeping
From the get-go, you’ll need a chart of accounts, balance sheet, and profit and loss statement. If you don’t know how to produce these or you’d prefer to devote your energies to growing your business not tearing out your hair, hire a bookkeeper. If this seems too overwhelming, at the very least, grab a shoe box from the closet and throw in all of your business-related receipts and invoices.
9 ) Purchase a general liability policy
Call your insurance agent (whoever insures your home or auto) for a quote on a commercial policy for your business. The cost of insurance will depend on the type of business, number of employees and annual sales.
10 ) Write a business plan
Take your grand ideas and dreams and apply the structure of pricing, marketing, and cash flow to them. The business plan doesn’t have to be elaborate–one-page might do–but the simple act of articulating your vision will drastically increase your chances for success.
If you need help starting or running a small business, consider hiring a small business coach.