Are you looking to start your own business? That’s great!
As you might have imagined, there’s a lot more to it than just coming up with a business idea and opening up shop. You’ll need to go far beyond settling on a name, creating a business plan, and carving out your niche (although you will indeed have to do these things as well). Creating a business start-up will also involve several items on your checklist to make sure your business is legally compliant.
Rather than getting overwhelmed trying to scour the web to figure it all out yourself, we’ve compiled everything you need to know about the startup business requirements right here in this post. Let’s dive right in!
Prepare a Business Plan
Step one is to come up with a business plan. In your plan, you will define your startup business and what it does, your products and services, outline your goals, and consider your operating procedures and even your competition. While this might seem like more of a suggestion than a requirement, it actually isn’t. If you will need funding for your business in the form of loans, a business plan will be required to find investors.
A tip here: Think like a marketer, and highlight what you are selling as well as how consumers can find you.
Choose a Name for Your Business, Then Get it Registered & Trademarked
While it’s easy to agonize over coming up with the absolute perfect name for your business, it might just be a waste of your time. Time you could be using getting your business up and running and making money!
It’s important to note that your business entity can actually operate under a different name than the one you assign to your company. You can also change your company name later on if you’d like, but you settle on a business name to get the administrative side of things moving, then worry about changing your “doing business as” name later. This will take mere minutes to adjust, so don’t sweat it.
But wait, what’s that “doing business as” thing? In order to register your business name, you will most likely register a “Doing Business As” (DBA) or “Fictitious Business Name” (FBN). While a DBA isn’t required, you will want to choose one, since your business name will default to the name of your business’s legal owner otherwise. This means that if your name, as a business owner, is John Smith and you open a hardware store, your store will actually be called “John Smith.” Not “John Smith Hardware” or any other variation you wanted to call it.
By choosing a DBA, you will let your local and/or state government know what name you will operate your business under. Rules will vary from state to state regarding changing your DBA name, but most will allow changes rather easily.
While choosing a DBA does not necessarily offer trademark protection, it will enable you to create and use your business name for marketing purposes. For this reason, you may also want to create a logo for your business during this stage so you can print some business cards and stationery. This will help to establish your business identity, and help people become more familiar with you.
Unfortunately, your DBA will not protect your brand in any state where your business is not registered. So if your business will be taking part in e-commerce businesses, providing any kind of online services, or operating in multiple states, you should consider having your business name trademarked. This will provide the best protection for your brand. To get your business name trademarked, you will have to apply with the U.S. Patent and Trademark Office (USPTO). You should also conduct a search with the USPTO beforehand to make sure your chosen name is not already taken by another business.
It’s actually a good idea to spend some time searching on the USPTO and Google to see if your proposed business name is already taken, so you don’t waste any of your time and money investing in it.
On top of all that, if you have any intellectual property involved in with your business, you need to protect it by registering for patents, copyrights, or additional trademarks with the USPTO. Even after registering, you will need to be on the lookout to protect your intellectual property, as the USPTO is not an enforcement agency.
Get Your Employer Identification Number (EIN)
Another requirement to start your business is to register for an employee identification number (EIN). An EIN is a requirement for most businesses other than a sole proprietor who has no intent to hire employees. This is a federal tax number that will be used to identify your business. The IRS will use the number to track what taxes your business will owe the government.
Even if your type of business does not require an EIN, it might still be a good idea to get one. You can easily apply for an EIN with the IRS online. It’s free, and it will only take a few minutes of your time. Plus, if you get an EIN, you won’t even have to worry about identity theft, since you can keep your Social Security number private. Without an EIN, your Social Security number will be used for tax purposes, so an EIN actually offers a layer of protection as well.
Acquire the Proper Licenses & Permits
That’s right! You need licenses and permits to operate a business, depending on your industry. This will be an easy form to fill out with your city or county office and will take just a few minutes. For your privacy, it is wise to use your EIN instead of your Social Security number when applying for business licenses.
When applying for your business licenses, you may be asked for an estimate of your annual gross receipts, but since you are just starting, you don’t need to worry about being completely accurate, as it is just an estimate. However, you do at least want to be in the right ballpark.
Depending on where your business is located and your industry, you may also need to be licensed on the state or federal level. Many businesses won’t have to register with the federal government, but those that are involved in any industry that is supervised and regulated by the federal government will need a federal license. This includes businesses in industries such as agriculture, alcohol, aviation, broadcasting, interstate and maritime transportation, environmental, firearms, fish and wildlife, mining and drilling, and investment advising, and will all require the proper licenses and permits to operate. State licensing and permits will vary depending upon location, but you should always verify with your local and state office to make sure you are on the straight and narrow.
Review Business Laws and Regulations
There are many laws and regulations that will come along with operating a business. Some that apply to large corporations will also be applicable to small businesses, including advertising, marketing, intellectual property, finance, and privacy laws. There will most likely be many legal details and forms you will need to work through to make sure you are legally compliant.
Financially Prepare Yourself
Chances are you’re starting a business because you see an opportunity to provide a service and make some cash flow. But in order to do so, you’ll have to be prepared financially.
A great first step here is to get yourself a business bank account. It’s incredibly easy to mess up your accounting if you keep your business on your personal bank account, but having a separate business account that you will use for all of your business transactions will eliminate that possibility.
Here you will once again use your EIN to set up your account, as well as information such as your business type, formation date, and owner name and address. If your business is not incorporated, you will need a DBA. Once you have it set up, you should use this new business bank account for every business-related deposit, withdrawal, and transaction. You should choose a bank or credit union that is convenient for you. Pro tip: Often, a local credit union will offer better deals and services than a big bank.
Beyond your business bank account, you should also set up your business accounting. You may want to enlist the help of an accountant to handle your finances unless you are confident you can handle it yourself. You will need to know how to account for all of your business disbursements, payments received, invoices, accounts receivable and payable, start-up assets, start-up expenses including start-up costs, and more. If that’s already sounding like a lot, play it safe and find a good accountant who works with small businesses in your area.
If you don’t have enough start-up capital to start the business yourself, now is also the time to start seeking start-up business loans from banks, investors, or the Small Business Administration (SBA) loan programs. Lastly, you should look into establishing a business line of credit to help reduce how often your business prepays for purchased products and services. This will also help to establish strong credit history, which makes for good vendor and supplier relationships.
Learn Your Tax Requirements
Your tax responsibilities will vary greatly based on your business structure. While any business that has employees will need an EIN, sole proprietors will also have certain tax obligations, such as self-employment tax, that you will need to be aware of. But it all depends on your specific business structure and what obligations you have as well as what forms you need to report your taxes. Check with the SBA to learn your federal tax requirements. The same goes for state tax obligations.
Hire An Attorney
To give your small business and companies the best chance for success, you should also hire an attorney. All of those licenses, permit, and tax requirements can get confusing, but a knowledgeable lawyer can help you save time and money while keeping your business legally compliant. Contact an attorney at Bremer Whyte today to schedule a consult and get your start-up business up and running.