Unfortunately, the U.S.
economy is not rebounding as fast as anyone would like. High unemployment rates have many Americans
considering establishing their own businesses. If this is something you’re
contemplating, remember, it's one thing to start a business...and quite another
to start a successful business.
So before you decide to hang out a shingle, here are a few best practices, both legal and practical,
for you to consider.
Getting
Started – Make a List and Check it Twice
You probably
don’t head to the grocery store without making a shopping list. Your new business should not be of any less
importance. Here is a basic (but
certainly not exhaustive) list of some business essentials:
- Decide on a business
entity. This is the most important
step. Will this be a Limited
Liability Company (LLC)? A corporation?
A partnership? A qualified
CPA or attorney will be able to walk you through the process of obtaining
the correct documents to establish your business identity. Note:
This decision can impact your personal assets directly; more on
this in the next section.
- Get a place, and some
space. Will you be working out of
your home or are you planning to have a “brick and mortar” establishment
for your customers? Make sure your
work environment has enough space to allow for potential employees,
customers, and products. And be
sure you have enough funds on hand for a monthly lease or rent.
- Set up the proper bank accounts
(and get checks) at your financial institution. Consider banks other than the national
chains. Smaller banks, such as The
Commerce Bank of Washington
offer fantastic customer service for small and growing businesses.
- You'll want to establish
a Federal Tax ID number. Some
business owners use a Social Security Number, but it might be a better
idea to file for a Federal Tax ID.
You'll also need a State Unified Business Identifier (UBI)
number. Also file a Master Business
Application and a City Business license to make sure you’re following
local and state ordinances.
- An Electronic Federal
Tax Payment System (EFTPS) makes paying taxes for employees a breeze. Alternately, consider outsourcing your
payroll and tax payment needs to a bookkeeping service. In Seattle, I
recommend Pearson Business
Management Services.
- You'll need to keep
track of every dollar coming in and going out. Unless you hire a CPA, you'll need
business and accounting software to keep all of those financial columns in
line.
- Malpractice insurance,
employee health insurance, business insurance: make sure all your insurable
exposure is covered.
- Head to the Office Supply Store. Marketing materials, computer equipment, furniture, copier, phones, postage meter, stationery, business cards are just some of the items you'll need.
- Set up your mail accounts. Don't open those doors without setting up accounts with UPS, FedEx, or whatever postal and/or delivery service you plan to use.
Protect
Your Assets
As
I mentioned earlier, protecting your assets is the most important step during a
business startup. If you choose to go
into business as yourself (e.g.: John A. Smith's Shoe Repair), you run the risk
of unlimited liability against your personal assets – your bank account, your
house, your car – in the event something goes wrong. It's much better to do business as an LLC or
a corporation so that your personal assets are kept separate from your business
assets. Discuss with your attorney or
accountant the potential benefits of filing taxes as an S-Corp, an option
available to both corporations and most limited liability companies.
Personally,
I recommend LLC over a corporation.
There are a lot of formalities associated with becoming a corporation: annual
meetings, reports to shareholders, bylaws, amendments, etc. With an LLC, you have the flexibility of
being recognized by the IRS as an S company without all of the
formalities.
