You’ve taken the plunge and started your own business. Congrats. You’re really doing it, Harry. This stage can bring a whirlwind of emotions, including optimism, excitement, anxiety, and confusion. You’re probably cycling through euphoria and nervous sweats as you read this—totally normal. Because, even though starting a business is a good thing, it’s also an overwhelming thing.
But no worries, we’ve done this ourselves and we’re here to help. Here, we’ve mapped out 10 practical steps that will help curb those “WTF did I just do?” feelings and help you take this big leap responsibly.
Pick a bitchin’ name and then file a ton of paperwork, with our help. Get a bank account. Hire some pros to handle your taxes and insurance. Drink champagne.
Step 01 | Choose a Name
Have fun with this. Brainstorm. Make a running list of potential business names. The perfect name will probably not magically come to you overnight, so be patient. Think of ideas, symbols, sounds, and images that you want your business name to invoke. Once you’ve narrowed it down, ask friends, family, and potential clients what they think of your top names and what associations those names invoke.
As you come up with a list of possible names, you’ll want to do a preliminary search as to whether the domain name is available and also whether other businesses operate under a similar name and sell similar goods or provide similar services in your area. This is the beginning of what is known as clearing your trademark. Trademark clearance simply means you’ve taken the steps to ensure your business can use your brand name or mark without infringing on someone else’s trademark rights. There are many layers to the trademark clearance process; it starts with a preliminary search and hopefully ends with a successful registration of your mark with the USPTO.
Step 02 | Finance Your Business
Evaluate your financial needs and research funding sources, if necessary. For more information on the financing stage, read our article Raising Money for Your Business: A Primer.
Step 03 | Settle on Structure: LLC or Corporation?
Decide which business model will work best for your company—LLC or corporation. To learn the key differences between these business models, read our article Should My Business Be an LLC or Corporation? For more options, check out 4 Corporate Forms and Breaking Down the Benefit Corporation.
Once you’ve decided on your entity’s legal structure, file the appropriate documents at the federal, state, and local level. And we can support you with the filing process.
Step 04 | Register Your Fictitious Business Name (FBN) IF Applicable
If your legal name matches your business name, you can skip this step. If you are doing business under a name different from your legal name, you’ll need to register your Fictitious Business Name (FBN). [In some states, this is referred to as “doing business as” or DBA.] Your legal name is your official business name, found on your articles of incorporation or organization.
In California, you must register your FBN at the county level, typically with the county clerk’s office. Each county differs in filing requirements and fees, so be sure to call or Google your county clerk’s office, or reach out to us to handle your DBA application for you. Most counties require you to publish your FBN statement in a local publication to adequately register. Typically, your FBN must be renewed every five years.
Step 05 | Obtain Local Tax Certificate
You may be wondering—more taxes? Really? Unfortunately, yes. In addition to the IRS and California’s Franchise Tax Board [which charges a minimum annual $800 fee], your local government also wants a cut of your business income. Localities tax businesses on criteria such as net profit, gross income, number of employees, total payroll, number of vehicles, number of machines, and sometimes even seating capacity. Most cities categorize businesses and use different tax structures for each category. For instance, businesses within one category may pay a flat annual fee, while others pay a tax rate dependent upon gross receipts. Some cities also tax businesses based on activity, such as holding a live performance event. As above, we are here to help.
Step 06 | Open a Business Bank Account
Create and maintain a bank account strictly separate from your personal accounts. This is important if you ever get sued. If a company cannot pay the legal judgment entered against it, a court may “pierce the corporate veil.” In plain English, this means the court can collect money directly from the shareholders’ and members’ personal assets if it finds the company disregarded corporate formalities. One major way to disregard these corporate formalities is to commingle your personal funds with the company’s funds. So just don’t.
As far as selecting a bank or credit union goes, consider your options before you default to where you bank for your personal accounts. Even though it can be convenient to stick to one bank, other banks may offer better features for small businesses. You should look at the differences in online banking features, fees, interest, overdraft protection, and minimum balance requirements.
Step 07 | Obtain Business Permits and Licenses
The permits and licenses you need will vary greatly depending on the type of business. For instance, if you sell retail goods in the state, you’ll need to obtain a state seller’s permit and collect state sales tax. You’ll also need to comply with local business regulations and zoning laws, as well as federal and state regulations. In California, Cal Gold provides a convenient way to look up the federal, state, and local permits and licenses you need, based on your county and business type.
Step 08 | Reach out to an Insurance Broker
Businesses manage risk, in part, through insurance policies. The insurance market provides businesses with lots of options. With that being said, you don’t want to over-insure. Instead, you want to strike the right balance—obtain maximum protection without paying for policies for every conceivable risk.
Two common and useful policy types are property insurance and liability insurance.
- Property insurance covers your business when fire, theft, or disaster strikes. Insurance companies provide several types of property insurance policies. For example, cheaper policies may cover the business premises, but not the business assets kept there.
- Liability insurance, typically known as a “commercial general liability” (CGL) policy, will cover damages if someone is injured on your property and your business must pay damages for the accident. Personal injury, product liability, and automobile insurance are other types of liability insurance. Specialized insurance policies also exist for employment practices, business interruption, and malpractice.
We’ve only scratched the surface on business insurance. We suggest you find an insurance broker—someone who can help you figure out the best deal and the best policy for your business venture. Look for a broker experienced in your industry and ensure he or she understands how you plan to operate your business.
Step 09 | Hire a Tax Professional
Find a tax professional to help you implement a proper tax plan for your business. The complexity of your business and your tax needs will dictate the type of tax professional you will need. A bookkeeper can pay bills and track expenses and income, whereas a CPA (Certified Public Accountant) can help you plan your taxes, and prepare and submit your returns.
Step 10 | Understand Employer Obligations
Employers must comply with several legal, tax and bureaucratic requirements when they hire employees to help operate their business. So first off, make sure you need employees before you hire one. Could an independent contractor do the work for you instead? On that note, make sure you understand the difference between an employee and an independent contractor. The IRS notoriously penalizes businesses when they incorrectly pay a person as an independent contractor when he or she qualifies as an employee.
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All done with these 10 steps? Well, we have good news and bad news. The good news is that you’re well on your way toward entrepreneurial bliss. The bad news is that these numerous federal, state and local agencies don’t just go away once you’ve formed your business. In fact, each year your business must comply with tax, legal, and employment regulations. Don’t worry, we’ve got you covered there, too. Take a break and celebrate your newly formed business. When you’re ready, read our article here on annual requirements for for-profit entities. Maybe with a glass of Veuve.
By: Jenna Macek – revised 1/2/18
Disclaimer: Although this article may be considered advertising under applicable law and ethical rules, the information in this article is presented for informational purposes only. Nothing should be taken as legal advice. Reading this article does not form an attorney-client relationship with us. An attorney-client relationship is formed through a signed engagement agreement. If you would like further information, wilkmazz pc would love to help you out! Feel free to reach out with any questions.