The details and planning required to start a small business can seem overwhelming. That's why many would-be entrepreneurs never manage to take the small business plunge.
Fortunately, taking care of the details -- getting a business license, obtaining permits and other related matters -- is actually fairly easy. Then, once you have your basic infrastructure in place, you can spend your time focusing on what entrepreneurs do best: making money.
One quick note: We won't cover deciding whether your business should be a sole proprietorship, partnership, LLC or corporation. Many entrepreneurs, especially those starting a side business, begin as sole proprietors, but the decision regarding which legal entity to form is one you should make only after consulting with an accountant or financial professional.
Here's a quick-start guide to starting your own business:
Determine your business name. While branding, unique selling propositions and business-identity considerations are important, keep in mind there is no perfect company name. So don't worry about selecting the ideal URL, dreaming up the perfect website design or roughing out your promotional literature. Pick a name. You can always operate your business under a name that's different from your company name. (That's what a DBA, or "doing business as," is for.) And you can always change your company's name later, especially if you end up doing something different than you originally thought.
Apply for an Employee Identification Number (EIN). An EIN is a federal tax number that is used to formally identify your business. Although you don't need an EIN unless you plan to have employees or form a partnership, LLC or corporation, it makes sense to apply for one. The process only takes a few minutes and is free. If you don't have an EIN your Social Security number is used to identify your business for tax purposes. An EIN allows you to keep your Social Security number confidential. All you have to do is go to the IRS website and apply.
Apply for a trade name. If you decide you won't operate your business under your own name, some localities require you to register your trade name. Go to the courthouse and fill out the form. In most areas, applications get approved on the spot.
Apply for a business license. The county or city where you live will require you to have a business license. The form takes minutes to complete, but make sure to bring your EIN and approved trade name application form. You may also be asked to estimate what you think your business will gross in terms of annual receipts. Don't get hung up on trying to create the perfect forecast. If you're just starting a business, there's no way to know.
Complete a business personal property tax form. Some localities require this form while others do not, so ask while you're at the courthouse. In many areas this form is not required for the first year of operation. There is no need to list equipment, tools, supplies, computers, etc. that you already own and plan to use in your business. Keep track of any tangible business personal property you buy later, because you will list those items when you file next year's form.
Apply for other required permits. Every locality requires different permits. Ask about zoning requirements, permits to allow you to run a business from your home, etc. If you're not sure, just say, "This is the type of business I'm setting up. What permits do I need?" The clerks will tell you.
Apply for a certificate of resale. This is only necessary if you plan to sell products and are required to collect sales tax. (A certificate of resale is sometimes called a seller's permit.) Check your state department of taxation website for details.
Establish a business checking account. Keeping track of business and personal expenses can be tough at first. An easy way to make sure you don't use the wrong funds -- and lose out on possible deductions -- is to have a business checking account you use solely for business purposes. Don't put the account in your name, though. Use your business name and business EIN to identify the account. Running all your revenues and expenses through a separate account will make your accounting a lot easier. (Remember to ask a lot of questions about the account: monthly fees, charges for checks and deposits, etc. Business checking terms and costs vary widely from bank to bank.)
Set up a simple way to keep your books. Business accounting software is great but can be a little daunting at first if you've never run a business. For now, create a spreadsheet or even use a notebook to log the revenue you receive and the money you spend. Later you can set up a more formal system, but as long as you keep track of all your expenses and all your income, you'll be fine at first.
All of the above may sound like a lot to accomplish but it's actually very easy. Plus there will be people happy to help you. The staff at your courthouse and your locality's treasurer's office will answer any questions and walk you through the different processes.
Best of all, unless your area has unusual requirements, you can get the basic infrastructure of your business set up in no more than a day or two. Then you're off and running!