More than 640,000 new businesses are started each year in the United States. As millennials bring their work-life balance thoughts to the marketplace, Gen-X folks seek to bring their business ideas to fruition and Baby Boomers give post-retirement companies a try, this number is likely to rise. Naturally, there are many caveats for ensuring business success, but getting your business structure in place is first on your list. Here is a list that includes essential first steps for you as an entrepreneur to get your business off the ground.
Your New Business Checklist
- Naming Your Business
Your business’s name is its identity—an important factor, since it will introduce your business to prospective customers. There are many good ideas for businesses traveling around in people’s brains. Getting a name is critical so that you can begin the administrative work that must happen before you ever make your first sale.You can always operate under a different name than your company by completing a “doing business as” form. You can also change the name of your company in the future.
- Choose Your Business Structure
You should consult with a tax professional to determine what type of business entity is most appropriate in your circumstances. Whether you choose to operate as a sole proprietorship, partnership, limited liability company, S-Corp, or corporation could have significant tax consequences. Be sure to comply with any formalities associated with the entity you choose.
- Get Your Employer Identification Number (EIN)
The federal government identifies your business with this number, just as it identifies individuals with a social security number. If you expect to form a partnership, LLC or corporation, an EIN is required. Even if you are not sure about your business structure yet, get an EIN number. It’s free and it will help you keep your social security number private, reducing the risk of identity theft. You can apply for an EIN number here.
- Register Your Business or Trade Name
You may wish to operate your business under a name that is different from your own name. If so, your municipality may require you register your trade name. You can search the Arizona Corporation Commission website to determine if your chosen name is available ,and apply to register your trade name with this form.
- Get Your Business License
Most municipalities require you to obtain a business license to operate in that community. Most applications may be obtained online and only takes a few moments to complete. Fees are typically nominal, in the $40-$75 range. When you apply, use your EIN number rather than your social security number to identify your business. You will be asked to estimate your annual receipts—don’t spend too much time and energy arriving at this number. All that is needed is a broad estimate.
- Explore Sales Tax
Visit your state’s website to learn more about what you will need and what state sales tax applies to your business.
- Naming Your Business
Creating a Business Plan
The Small Business Administration, www.SBA.gov, offers resources for every aspect of owning a small business. Every serious entrepreneur is expected to have a written business plan, especially if he or she expects to seek funding at any point. This document is a living piece that can change with your business as it grows and becomes established.
These are the elements that the SBA recommends any good business plan should include:
- Executive summary – A brief statement that outlines your business
- Company description – It explains what your business offers and how it delivers it
- Market analysis – A brief of your business’s competition, the outlook on the market and projections
- Organization and management – What business structure you are using (S-Corp, LLC, etc.)
- Service or product – A catalog of your services or products
- Marketing and sales – How you will find business, your marketing strategy and sales structure
- Funding request – The funding you will need for the next three to five years and where you expect it to come from
- Financial projections – A sketch of your balance sheets
- Appendix – Any qualifying documents or legal documents, such as permits, resume, certifications, etc.
Establishing a Budget
Estimate what you will need to begin doing business. Create a spreadsheet of your projections for immediate materials to get started and estimates of their costs; err on the high side if you aren’t sure of these costs. Many new businesses underestimate what things will cost.
- Secure a Business Bank Account
Secure a business account so that you are sure to keep your business and personal funds separate. Commingling your personal funds with business funds can cause you to run into issues with the IRS. You will need your EIN number for this. Shop your local banks and credit unions for the best business deals.
- Track Your Revenue and Expenditures
You can always work on business accounting software later. In the beginning, just use a spreadsheet to capture costs and receipts.
Legal Ramifications of Setting up a Business
Starting a business can be among the most exciting and inspiring things you ever do. Most of these steps and others can be done by researching and reading up on small business. Depending on the type of business you are starting, however, some steps can be confusing and could have costly consequences when done incorrectly.
Our firm is proud to help many Arizonans launch their small businesses. We can help. Contact us today to see how we can help you get a solid, legal foundation for your new business.