Even when you’ve done it before, starting a new business is not easy.
Oh, it’s easy enough to get into business – just start selling whatever and, technically, you’re “in business”. But starting a new business deserves more than that. This is certainly a case where haste makes waste. It is hard not to forget or overlook important issues, and failure to take care of all of the details on a timely basis can be expensive.
To ensure a smooth beginning, you may want to review some of the things new business owners must address. Making a checklist of the items that apply to your new business should reduce your chance of missing something. We hope the following will help.
While many sole owners of businesses start a business with their business plan in their head, larger undertakings deserve a well thought out business plan, particularly if outside investors and/or bank loans will be needed. A business plan that includes a market analysis and financial projections based on anticipated profit margins and expenses will be of great value.
From day one, you will be well served if you have access to sound legal advice when needed. Consider attorneys with satisfied clients operating businesses that are similar to your planned business.
Determine how and by whom your accounting will be done from the very beginning. It is certainly wise to seek the advice of an accountant who can help you establish proper procedures and avoid the expense of unnecessary taxes and penalties that can result from poor initial planning.
If there are to be other owners, the relationship, basis, terms and conditions surrounding their ownership and involvement should be understood and agreed upon and, if feasible, outlined in writing. A complete understanding of what is expected from all of the parties will eliminate possible misunderstandings and conflict in the future.
Determine which business entity will serve your new business best. The process of choosing between a sole proprietorship, a general partnership, a limited partnership, a limited liability partnership, a c corporation, an s corporation, and a limited liability company (LLC) involves much more than one would at first think. To help you make the right decision, we have prepared Questions for You - When Choosing a Business Entity. We think you will also be helped by the detailed comparisons in our Overview of Business Entities.
Naming a business sounds simple. But coming up with a great, unique name customers will like and remember that no one else uses or has a claim to is very difficult, and it gets even harder if you’ll be doing business over a large area or, as most businesses do nowadays, using the Internet. The more coverage you have, the more likely you are to encounter other businesses with the same name or one similar enough to cause conflict. At the very least, you will want to avoid potential conflict by researching existing business names as thoroughly as possible.
Federal trademark registration of your business name may be worthwhile if you want to be certain it doesn’t infringe on someone else’s use of the name as well as protect the name from infringement by others. You will want to avoid having to change your name because it infringes on another business name, particularly if you will be spending money for name recognition. You can start your research at the US Patent & Trademark Office web site.
Federal Tax Identification Number (EIN)
You should obtain your EIN by submitting IRS Form SS-4 to the Internal Revenue Service. It will be used to identify the business in any number of transactions and will be needed to open a bank account. MaxFilings offers both Federal Tax ID Preparation and Federal Tax ID Obtainment.
You will want to open a checking account for the business. You will need your Federal Tax Identification Number (EIN) to do this.
Locate and compare possible business locations for the business. Don’t forget to consider zoning requirements as well as any taxes, licenses and permits that may be based on the business location.
Licenses & Permits
Find out what licenses and permits will be required and make certain you will be able to obtain them.
Determining what insurance will be required and making certain you can be covered is something that should be done early on. It is sometimes even necessary to discontinue plans for a new business because required insurance coverage is either unavailable or will cost too much.
Product promotion usually accounts for a large portion of business advertising dollars. The more dollars spent promoting a product, the more advisable it is to make sure the name is available and then federally register the name and/or logo.
Identify and determine if and how you should protect any valuable intangible or intellectual property the business will have. Consider things such as product or service names, logos, inventions, formulas, computer programs, or other confidential information. Do I Have Trade Secrets To Protect? should you help in the identification process while How Do I Protect My Trade Secrets is designed to help you take steps to protect your trade secrets.
Identifying and, when possible, pre-selling customers before you are actually open for business will help get you into the profit column sooner.
Customer Contracts & Agreements
All written customer agreements and contacts that are needed should be ready before you open for business. Depending upon the product or service, you should address a number of issues such as prices, shipping charges, installation, training, payment terms, late fees, collection costs, returns, guarantees, warranties, implied warranties disclaimer, etc.
Establish and set forth your employee policies as soon possible. Prepare non-compete, non-disclosure, and any other agreements employees may be expected to enter into. Review both state and federal laws relative to payroll taxes, workers’ compensation insurance, and other employment requirements. Obtain all of the forms that will be needed as well as notices you re required to display.