To many, owning a small business is the American dream. A chance to be their own boss and make their own way. Entrepreneurs have ideas for new businesses all the time- whether it is the next big thing to revolutionize an industry or a tried and true concept. However, when it comes to the actual small business startup process many would-be business owners are lost. No matter what the concept or the business is, there are a number first steps that are universal to the small business startup process.
Small Business Startup Steps:
Form an Entity
Forming a business entity should be the first step of any small business startup process. While there are numerous options available, most businesses will choose between a corporation and a limited liability company (LLC). These two choices provide for limited personal liability for the actions of the business. For most businesses, and business owners, this is a critical need. Generally, limited personal liability means a business owner's personal assets cannot be reached by creditors of the business. After the entity is formed everything should be done in the name of the entity and not the owner, including signing leases and contracts.
Obtain an EIN
The Employer Identification Number (EIN) or the taxpayer identification number is like a social security number for the business. Every business should have one even if the business does not have or plan to have employees. This number will be used to pay taxes, pay employees, open accounts and various other purposes. Getting an EIN should be done early on in the small business startup process.
Open Business Bank Account and Business Credit Card
Begin establishing your business credit. Open business bank accounts, order checks, and apply for a credit card. Once established use these accounts for business purposes only. Never commingle funds and never use business funds to pay for personal expenses. These accounts should not be an extension of our personal finances.
Determine Necessary Licenses and Permits- And Get Them
Many businesses are required to have licenses or permits. Some require exams, inspections, and waiting periods. Do your research. Make sure you plan accordingly. If you plan on doing construction in your leased premises don't forget that you will need a construction permit.
Have a Trusted Support Team in Place
Every small business owner should have an accountant, a lawyer, and an insurance agent who is familiar with the business and can advise on various issues. Have this support team in place from the beginning. When a questions inevitably comes up you should be able to have an answer a phone call away with no need to find these professionals.
The amount and type of insurance you should obtain for the business depends on a number of factors. Landlords will generally specify specific coverages in the lease. General liability insurance is a must. Consult with an insurance broker to determine the amount of coverage you need. You should also consider business interruption insurance; which will cover you in the event the business is forced to temporarily close for any number of reasons.
This post is for informational purposes only. It is not intended to be, nor should it be construed, as legal advice. Always consult an attorney, licensed in your state, before taking legal action.