Starting a business is exciting, but requires a lot of careful planning. Without a thoughtful execution, a great idea may not flourish into that successful business you have been dreaming of. Or, worse, you could expose yourself to liability. Take the time to plan accordingly to protect yourself, your business and your financial security. Whether you’re a budding entrepreneur or have a groundbreaking idea, this checklist will help you navigate the process of turning your business dreams into reality.
Write a Business Plan
Writing a business plan is one of the most important steps in starting a business, yet is often overlooked by first time entrepreneurs. A well-thought-out business plan will be your roadmap to success. This document will guide your decisions and can serve as a valuable tool when seeking funding or partnerships. You may also need a business plan to open a bank account or to obtain the necessary insurance.
Choose the Right Legal Structure
Choosing the right legal structure is important for many reasons. One of the primary reasons for selecting a specific legal structure is to shield personal assets from business liabilities. This means that if you are sued and lose, your personal assets can be exposed and someone can go after your personal bank accounts, 401k, your house or even your car. By choosing the correct legal structure, you can protect yourself from that exposure. The correct legal structure can also impact tax implications, management decisions, credibility, and regulatory compliance.
Choose a Company Name
There are two things you need to think about when choosing a name: availability and branding. Branding can make or break you. Coming up with a unique yet memorable name is key. If your company is internet based or you decide to have an online presence, you want to make sure that a website with your company name is available. You can search availability on GoDaddy. Once you have your name, you then need to make sure that another company with the same name does not already exist. It would be unfortunate if you spend time and money on branding and find out that someone already has rights to that name.
State level
Most states don’t allow you to register a name that’s already been registered by someone else, and some states require your entity name to reflect the kind of business it represents. You will need to check with your own state to see if your company name is already taken, and if so, if the state will allow another company with the same name.
Federal level
A trademark will protect your business name on a federal level. Before choosing a name, search the trademark database to see if another company with your name already exists. If so, choose another name or variation.
Choose a Business Location
Choosing a business location goes beyond the benefit of close proximity to your home. A business location must take into consideration target client base, layout, tax implications, government incentives and more. Sometimes a business location is registered in a different state from where you live. It may be best to speak with a financial adviser or accountant to discuss tax benefits and implications.
Register Your Business With Your State
Once you have established a business location, have chosen the right business structure and identified your company name, you can register you business. For most small businesses, registering your business is as simple as registering your business name with state and local governments. Remember, if you don’t register your business, you could miss out on personal liability protection, legal benefits, and tax benefits.
Obtain a Federal and/or State Tax ID
Most businesses don’t need to register with the federal government to become a legal entity, other than simply filing to get a federal tax ID. You will need a tax ID before obtaining licenses, a bank account and in some instances, business insurance. You must file with the IRS for an EIN number.
Apply For Licenses or Permits
Most business don’t require a federal license. However, if your business is regulated by a federal agency, you may need a federal license. Check to see if any of your business activities are listed here.
The licenses and permits you need from the state, county, or city will depend on your business activities and business location. States tend to have more businesses that need licenses than the federal government. You will need to check with your own state, county and city regulations on whether you need a license or permit.
Open a Bank Account
Once you have a registered business and federal tax id, you can open a bank account. Many banks offer small business checking and savings. The bank and type of account will obviously depend on your business needs and preferences. Speak with different institutions to compare the benefits offered.
Obtain Business Insurance
Business insurance is essential to owning a company. While obtaining liability protection under a the correct legal entity is important, business insurance should not be forgotten. In the event of a claim or lawsuit, your business could suffer a detrimental financial loss. Sometimes attorney fees alone can cause your company to bankrupt. Obtaining business insurance can save your company, and possibly you, from financial ruins. In some states, failure to secure and maintain business insurance can be deemed negligence. A court of law may rule that the owner pay out of their own personal assets. This is true even if the owner is protected under a legal entity.
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This article is intended for informational purposes only. It provides general information and is not intended and should not be construed as professional advice. The author is not your attorney, accountant, financial planner or any other professional and no professional-client relationship is created. We do not represent that the information provided is accurate or up-to-date as laws and regulations are always changing. If you have an issue that requires professional help, you should contact the appropriate professional to help you on your specific set of facts. Please read the Terms and Conditions for additional information.
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