Starting a business can feel like a juggling routine. Business owners have to consider a number of legal, financial, and practical requirements to start a business, which is why it’s important to stay organized.
This checklist will help you translate your passions into practical steps and put you on the right path toward business success.
Choose a Name and Legal Structure
One of the first requirements to start a business involves choosing a business name. If you operate a sole proprietorship, you’ll have to register your business name as a Doing Business As (DBA) name. Otherwise, your business documents can default to your personal, legal name.
Your legal structure will determine everything ranging from your day-to-day operations to how you plan your taxes. The four most common structures are:
- Sole proprietorships
- Partnerships
- Limited Liability Companies (LLCs)
- Corporations
Sole proprietorships are the easiest to set up for new business owners, but some will prefer the additional protection offered by an LLC.
Write a Business Plan
Make sure to have a well-written business plan when starting a business. A business plan can help you stay focused on your core business activities and goal. Lenders will typically expect to see a business plan before approving you for a business loan.
A typical business plan should include:
- Business description
- Market analysis
- Competitive analysis
- Management structure
- Marketing plan
- Financial projections
- Funding needs
The plan should also include an executive summary on the first page that highlights the plan’s key points and clarifies the next steps for your business.
File for an EIN
You’ll need a federal Employer Identification Number (EIN) if you’re set up as a corporation, LLC, or partnership or if you have employees. This number will identify your company for tax purposes, just like your personal Social Security number.
Even if you’re operating as a sole proprietorship with no employees, an EIN can help streamline your tax process, and you’ll also be spared from including your personal information on your business documents.
Open a Business Bank Account
When starting a business, it’s tempting to use your personal funds when purchasing equipment or performing renovations. But mixing your personal and business expenses can be a recipe for disaster.
This creates confusion when filing your taxes, but it can also leave you personally liable if your business should go under or get slapped with a lawsuit.
Most traditional banks offer some business services, though banks also exclusively operate online. Some entrepreneurs prefer brick-and-mortar establishments for the convenience of making frequent cash deposits.
Business bank accounts can also provide other benefits, such as offering Business Lines of Credit (LOCs) or features that can assist with eCommerce or other business processes.
Obtain Licenses
Depending on your industry and location, you may face additional legal requirements to start a business. Most cities and counties will expect you to obtain a business license, even if you operate out of a home office.
At the state level, you may need to obtain a sales tax permit when selling physical merchandise. The state may also require specific licenses for industries such as:
- Building contractors
- Banking
- Barbers
- Real estate
- Physicians
- Private investigators
Check with your state to see a list of industries that require specific licensing.
Finally, a federal permit may be necessary if you’re engaged in any of the following activities:
- Broadcasting
- Investment advertising
- Drug manufacture
- Providing ground transportation
- Preparing meat products
- Selling alcohol, tobacco, or firearms
Your licenses should be prominently displayed to comply with local and federal regulations.
Set Up an Accounting System
Keeping track of your books will be an essential, regular part of your business operations. Ideally, you’ll need a system that helps you manage your cash flow, plan for tax season, and gather data that shows trends in your overall performance.
Generally speaking, business owners have three options:
- Handling your own books with the help of software
- Hiring a bookkeeper or CPA
- Outsourcing your needs to an accounting firm
As your business grows, you may discover that it gets harder to handle your own books, so finding help with your books and record-keeping can go a long way.
Find a Franchise Opportunity Today
With so many legal and financial requirements, it’s easy to see the advantage of starting a franchise. With a franchise, these startup requirements are streamlined to make it easier to get your business moving, giving you all of the freedom of your own business at a fraction of the hassle.
To find a franchise opportunity in your area, visit Franchise Gator today.