Starting a new venture can be very confusing as well as exciting. To help you
make it as simple as possible, we have included the following checklist.
Step One - Prepare Business Plan
Planning is key to success. Prepare a Business Plan. The Business Plan will
serve two purposes. It will help you make sure you have researched and thought
out all the aspects of running the business so you don't have any big
unpleasant surprises. Also, the plan will help convince a bank or potential
investors that you are worthy of receiving some help in funding this new
venture. Remember that the plan itself will NOT get you funding, since new
startup businesses are very difficult to find capital. As the business owner,
you should expect to have to supply all the startup capital necessary from your
savings or from a bank loan based on income other than the business.
Step Two - Business Form, Taxes, Licenses, and Permits
Check with your Secretary of State - almost all states now are online - and
look for the Corporations Division to find the form for either Articles of
Incorporation (to form your own corporation) or Articles of Organization (to
form a Limited Liability Company). Most entrepreneurs today are forming a LLC
since it requires less paperwork to maintain it.
While you are waiting for the Secretary of State to send you the charter,
contact each of our city, county and state tax departments. Ask each of them if they require any of the following:
Business or Occupation License,
Business Personal Property Tax registration,
other specialized licenses for the type of business you are
starting.
Requirements will vary widely, with some states having county personal
property taxes (like Ohio or North Carolina) but many other states having none,
while other states may have a city license or tax (such as Philadelphia or New
York) but no county tax on businesses, to just a state license, etc. Some
businesses will have more licenses than others, such as a restaurant that may
have to get a local or county business license, a food or health department
license, and a liquor license from the city or county (or both), and possibly a
city fire inspection or occupancy license. Some state departments of taxation
(or revenue in some states) may have a booklet or checklist on what tax
registrations are required, and a few states offer booklets or checklists from
their Secretary of State, Corporations Division.
Also, contact your state Department of Revenue (or Taxation) to register for
sales tax (if you plan to make retail sales of tangible items, or if you live in
Florida you must pay sales tax even on services), and to register for state
income tax withholding (if you plan to have employees, including yourself as
employee of your own corporation, if you live in a state that has an income
tax).
If you will have employees (including yourself as an employee of your
corporation) contact your local state unemployment office, and ask for the forms
to register for state unemployment taxes. Most states now offer these
registration forms online.
Step Three - Employer Identification Number (EIN)
When you get your corporate charter back (if a corporation) then you must
apply for a federal Employer Identification Number (EIN). To do so, first go to
the IRS website and download form SS-4, and fill it out. Then call toll-free
(866) 816-2065 to get your EIN in 15 minutes or less.
Once you get the EIN number, download Form 2553 (S-election, if you want to
avoid double taxation on your company earnings), and fill it out. Be sure to
sign in BOTH places (as a shareholder in the middle of the page, and as an
officer at the bottom). We strongly urge you to mail this form via certified
mail, return receipt requested, since the IRS misplaces this important tax
election frequently, and the burden of proof is solely on you to prove you sent
it within the first 75 days. If you cannot find in the form instructions the
appropriate IRS address to mail the form for your location, then simply call
your local IRS office and ask them.
If you chose to form a LLC, you will also need to decide how you want to be
taxed (as a sole proprietorship, partnership, S-corporation, or C-corporation),
and make that election on IRS Form 8832.
Step Four - State Tax Identification
Now that you have the federal EIN number, you will need to obtain ID numbers
for state sales and income tax withholding, and for the state unemployment tax.
Complete the forms for these tax registrations that you obtained back in step
two. Adding the federal EIN number, you are now ready to mail in these state
forms.
With the federal EIN number in hand, you can now also open a corporate
checking account.
Step Five - Company "Papers"
If you formed a corporation, then you will need to have a Minute Book. If you
formed a LLC, you will need an Operating Agreement. Most office supply stores
sell "fill in the blank" kits (often called incorporation kits)
that have blank stock certificates, bylaws, operating agreements, minutes of
board of directors meetings, stockholder meetings, stock ledgers, and
incorporator meetings. Follow the instructions in these kits to complete the
paperwork to make your company "official" and legally
completed.
Step Six - Select Vendors
Locate suppliers (vendors) for the product you want to sell (or supplies you
will need to provide a service to the public). You should have done this in step
one as part of the business plan, but if not, then certainly complete it at this
stage.
Step Seven - Office space
If you are not working from your own home, then find appropriate office or
store space and sign a lease. If the lease is in the name of the corporation
rather than your personal name, that will limit your liability exposure should
the business not succeed.
Step Eight - Phone and Internet Service
Get a phone number and domain name (for your Internet web site) for your new
business. When you get the phone number, look into a yellow page advertisement
(or at least listing), and consider whether to be listed in several headings, or
just the most appropriate heading.
Step Nine - Equipment and Furniture
Get quotes on the equipment and furniture you will need. You most likely do
not need new stuff, and can save a significant amount of money by obtaining used
items. Check into the cost and cash flow differences between buying and leasing.
Step Ten - Product Pricing and Payment Methods
Finalize the pricing for your products or services that you figured out for
the Business Plan. Also, figure out your terms. Will you require payment
immediately or give customers 30 days to pay (or some small discount for paying
within 10 days or so)? If you want immediate payment, will you let customers pay
with a credit card?
If so, then talk with your banker about obtaining a Merchant Account, or
check out the finance companies online that offer Merchant Accounts. If you do
not have a good enough credit rating (or will most likely not do enough volume
initially) to qualify for your own merchant account, then you should consider a
service that will process credit card payments for you, such as PayPal.
Step Eleven - Information Forms
Think through every action that you will need to engage in to conduct
business, and consider whether you will need to design a form to properly
control and track that step. For example, to pay employees, you will need time
sheets or time cards. Unless you are a retail store with cash registers, you
will need to develop and have printed billing invoices, work orders, and similar
documents. Be sure to have a numbering system on invoices so you can track them
and make sure you do not lose any.
Step Twelve - Insurance
Talk with your insurance agent about what coverage you will need to secure.
At a minimum you will need liability insurance and probably renters insurance.
Many states require workers compensation insurance (or purchasing workers comp
coverage from a state agency in a few states) if you have a certain number of
employees (which can be as low as one in some states).
Step Thirteen - Marketing Yourself
Develop brochures and other marketing materials. If you will be representing
or selling particular brand lines be sure to obtain an ample supply of their
marketing materials. You will need to distribute marketing materials very
liberally in order to make some sales.
Work out any phone
Step Fourteen - Web Site
Develop a website (remember your domain name, from step 8?). At a
minimum, your web site will market your company to the world. Additionally,
depending upon what you're selling, you may want to be able to sell over the
Internet and remember to consider what information you want to gather from
prospects who visit your web site.
Step Fifteen - Employees and Required Forms
Hire employees and start a personnel file on each one. At a minimum you need
to include an I-9 form, an IRS form W-4 and the state equivalent form for
employee income tax withholding. Be sure to get each employee sign it.
If you will use independent subcontractors, you should have each of them sign
IRS form W-9. Some states have similar tax forms and a few have possible state
withholding requirements from selected contractors. Also, you may need to get a
copy of the contractor's workers compensation insurance (or cover the
subcontractor on your policy). Check with your insurance agent whether your
state law requires you to include subcontractors on your policy.
Step Sixteen - Open for Business
Plan a grand opening announcement and press releases to local papers and
business publications.
