Starting a Business

Thinking about starting a new business? Already have a business but not sure if you're set up correctly? Here are a few things to think about:

KEEP BUSINESS AND PERSONAL RECORDS SEPARATE. Depending on the size of your business and the volume of transactions, you can set up your recordkeeping manually, or with a spreadsheet or database if you know how. For most folks though, the easiest thing to do is get a small-business bookkeeping or accounting software package. There are a lot of them out there. Intuit makes Quicken for Business, and a number of flavors of QuickBooks -- including QuickBooks Pro and Simple Start Editions. Sage offers Peachtree Accounting. There are many others, including offerings by Microsoft, but Intuit and Sage seem to have the bulk of the small-business accounting software market. Make sure your software is scalable, that is, you can upgrade easily within the same family of products as your business grows; you'll thank yourself the first time you don't have to face a huge data conversion project just because you have to move to a different software package.

GET A STATE SALES TAX CERTIFICATE. Contact your State Comptroller's Office. Look on the web for their home page and find the contact information. They may have email, toll-free phone numbers, and local offices available. See if your particular situation requires you to collect and remit sales tax (it probably will). If so, see if you can be set up as an "annual filer" so you only have to file once each year. As your business grows, you may be required to file more often. Make sure you know the rules for your state and collect and remit only as appropriate. An accounting software package such as QuickBooks can help you with reporting requirements, particularly if you have a large number of transactions. IMPORTANT: once you are required to obtain a sales tax certificate and comply with applicable sales tax law, such compliance will probably extend to all personal (non-business) sales as well. BE SURE TO CHECK WITH THE STATE COMPTROLLER'S OFFICE TO ENSURE PROPER COMPLIANCE WITH ALL STATE SALES TAX LAW.


IF YOU DECIDE ON AN ORGANIZATIONAL STRUCTURE OTHER THAN SOLE PROPRIETORSHIP. There are a number of organizational forms besides sole proprietorship --  partnership, Limited Liability Company (LLC), Limited Liability Partnership (LLP), S Corporation, and C Corporation to name a few. Some of these require registration with the Secretary of State in the home state, and registration as a foreign entity if business is conducted outside the home state. They also may require separate, formal Articles to be established and filed with the Secretary of State, they may require a Charter and a Certificate from the Secretary of State, and they may require establishment of a Board of Directors, formal meeting minutes, etc. There are books to help you set up particular forms of organization, but for most folks it's better to consult an attorney for help if you want a form other than a sole proprietorship.

FEDERAL EIN. If you plan to pay anyone (part-time or full-time) as an employee, you must apply for a Federal Employee Identification Number (EIN). You will use this number to report payroll information and submit payroll taxes due on salaries and wages. You do not have to file payroll tax reports until you begin paying applicable salaries and wages. There are certain exceptions to the Federal EIN requirement and there are special rules that apply to hiring certain family members.

BUSINESS PLAN. You don't have to have a formal business plan, but creating one can certainly help you focus on issues like your business mission, model, and theme (Why am I in business; who will I serve; what goods or services will I provide; how will I provide these goods or services; what makes my business unique?).

BUDGET. Again, you don't have to have a formal budget, but creating one can certainly help you focus on issues like funding and burn rate (Where do I get my initial money to operate; how fast will I use these funds until my business starts to generate sufficient funds to operate without them; how can I keep costs in line with revenues?).

INCOME TAX. If you generate revenue, you have to report it, regardless of whether you make a profit or not -- and you want the IRS to consider your efforts a business, not a hobby. The method and forms used to file income tax for your business depends on the form of organization. You may be able to use tax preparation software such as TurboTax or Tax Cut, or you may find it necessary to consult a paid tax preparer. If you choose to consult a paid tax preparer, seriously consider choosing a CPA, tax accountant, tax attorney, or enrolled agent, depending on your specific needs. GOLDEN RULE: Report ALL income, then pursue all deductions to which you are legally entitled.

ESTABLISH A CREDIBLE PRESENCE.  Sometimes you have to look big in order to get bigger. Fortunately for small businesses, that's a lot easier these days. You can order business cards online or from local office supply stores for very little cost depending on the design and source. You can also make your own business cards using software you may already have and a little ingenuity.  Setting up a web presence and email is easier than ever too.  Try not to use one of the free email providers, though. You want to look big -- get your own domain name. There are a lot of ways to set up your own website and the cost can vary greatly. The "FREE WEB HOSTING" link at the upper left of this page takes you to 1stHostWeb. For the sake of full disclosure, I am a compensated affiliate of 1stHostWeb, but I recommend it because I have used it for several years and I like it. Click the link and you can read more, but as of this writing, you pay $35 per year -- that's it -- for registration of the domain name, and that's ALL you pay. They host your website for free, you get 25 megabytes of space, unlimited email addresses, and they have a lot of tools to help you get up and running and manage your website.

WIRELESS NETWORKING.  You may want to consider setting up a wireless network if you have more than one computer, or if you have a laptop and want to take advantage of its portability. It's a lot easier than you may think, and new hardware keeps getting better. For instance, Linksys recently produced hardware using Wireless-N technology, such as the WRT300N router, which has a number of enhancements over Wireless-G technology and appears to combine a lot of the features of the WRT-54G router and the NSLU2 NAS.