The decision to start a small business is a significant one that involves making key financial decisions and completing a series of legal activities. A successful entrepreneur isn’t always the classic, bull-by-the-horns risk-taker of legend. Sure you’ll need passion, drive and a good idea. But moxie will only get you so far. You’ve got to know your strengths and know how to make the most of them. Most importantly you must be organized, a planner and persistent. Below is a basic guide for those considering starting their own business and for those that have already started businesses that might be looking to improve their business structure.
Personality goes a long way in starting your own business and the business is often a reflection of those that start it. Successful business owners are creative, resourceful, organized, patient, sociable and persistent. In addition, before making the decision to start a business an entrepreneur needs to determine if the business idea is simply a hobby or a legitimate business idea.
A business plan is an essential roadmap for starting a business. By committing the plan to writing it forces business owners to establish goals and confront weaknesses. A complete business plan will address each of the following areas:
Choosing The Right Business Structure
Perhaps the most important benefit of forming a separate legal entity is business liability protection which is often referred to as the “corporate shield.” Shareholders, limited partners and limited liability company members, among others, are generally not liable for the liabilities of the company in which they have an ownership interest. However, until a company is formed, the entrepreneur is acting in a personal capacity and is personally liable. Consulting a legal professional is advised in this process so the correct entity can be formed for your business. The most popular types of entities are:
Business Name and Registration
Choosing a name of the business is important because it reflects your brand identity and will need to be registered with the appropriate state within which you plan to start your business. Corporations, non-profits, limited liability companies and partnerships are all required to be registered with states. The exception to this are sole proprietorships which are not required to be registered at the state level although many states require the owner use their name as the business name. All businesses, regardless of business structure, may also be required to do a fictitious business name filing if the business is conducted in any name other than the individuals or entity’s legal name which is referred to as dba or “doing business as.”
Licenses and Tax ID
If your business is involved in activities supervised and regulated by a federal agency – such as selling alcohol, firearms, commercial fishing, etc. – then you may need to obtain a federal license or permit. In addition, most states have licensing requirements depending on the industry your business is in and where it’s located.
Businesses may also be required to have an Employer Identification Number (EIN). This is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN. When starting a business you should consult an attorney to determine if your state requires a state number or charter.
Ryan A. Hintzen
The Hintzen Law Firm, PLLC