13 Questions to Ask Before Starting a Local Small Business
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March 10, 2017
Creating Your Company Name, Licensing & More
Probably the most intimidating thing for future local small business owners is knowing what steps they need to create their new business from a legal standpoint. Often we don't know what we don't know as the saying goes.
Well let's walk through the steps that you will need to follow to ensure that you are in compliance. Please know in advance this is just a guideline. Each city, county, and state are different so you will need to make sure that you check with your local authorities. But don't worry I’ll give you some tools and resources to help point you in the right direction.
The first step is to decide on a company name. I talk about this more in a previous post: LLC vs Sole Proprietorship so I won't go into great detail here but feel free to read this previous blog post for more information. So now that you have decided on a company name, for example, you might be Joe's Plumbing or Sally's Nails, now it's time to ensure that you get the proper licensing or certifications needed to operate a business in your local community.
There are two types of local small business owners, those that will work out of their home/vehicle and those that will have a brick and mortar business. Please know if you are a brick or mortar business it just means that you have a storefront. So basically you are renting out space and operating your business out of that space. Each type will have similarities yet their own differences.
Regardless of where you will run your business from, you will need a business license. Typically, you will get this at your local city hall. There will be a department you can visit or they may have a website you can apply online. These can vary in price but most run for $50-$100. Keep in mind, they will need to be renewed annually.
Make sure to ask if your particular business will require anything else from the city. For example, some businesses require certain permits. Especially if serving food of any kind. Also if you are dealing with any hazardous items. So please make sure to ask what else your city, county or state will require from you. You might also want to consider having standby generators for your business in case of a power outage to ensure that your business is still up and running.
Visit the IRS Link to All States Business Sites
You will also probably need to file for a state tax id. Please note this isn't your personal state taxes. These are taxes that you must collect on behalf of the state for products or services. You collect and then pay the state monthly this money. Basically, you are the conduit for them. Each state will have a list of businesses and services that require collecting money. Your state’s website will let you know if your business must collect these taxes.
For those of you that will have employees. You walk need what is called an EIN number. This is the federal tax ID for your new business and is used for tax purposes.
Visit the IRS Business Page for More Information
Speaking of employees. You will also need to set up your workers comp and business health insurance program. Worker’s Comp covers for injuries or illnesses that are caused on the job. Employees injured within your business premises have the option to hire work related accident lawyers or a personal injury attorney to negotiate a better compensation. So, even if not all states will require worker's comp, it's recommended to have one. It will depend on the number of employees. Once again your state website should have this information. The best resource is your insurance carrier as they can help you get this set up. If they don’t carry it, they will be able to recommend a few options.
It can be overwhelming I know, but I promise it isn't as painful as it sounds. As a matter of fact, there are some companies that can help you set up some of these items. You can use LegalZoom to set up your LLC as well as your EIN number. If you use a tax person, they could set up all of those for you as well. If you are hiring employees and are planning to use a payroll system, then the payroll company you use can set up your worker’s comp and other necessary items for your employees. This is the route I took when I started my previous business.
Remember there are additional resources like the IRS website and the local small business owner website. Once again, here are both links: IRS Business Site & IRS State Website. By way, make sure to visit the Small Business Administration SBA Website has lots of great resources. Check it out if you haven’t already.
As I mentioned, these steps will be easier than you think. Once you set them up you will be good to go and be ready to move on to the next phase of creating and starting your new local small business. The next step is to create your Success Blueprint.
Good luck and I look forward to helping you get your new Local Business off the ground!
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