Starting a business is an exciting endeavor. Launching new products, building a brand, and serving customers all bring tremendous rewards. Yet the back-end administration, legal, and financial responsibilities of running a business are significant. From registering with the government to protecting yourself and your employees with the right insurance packages, business owners have to take several important steps. Here are ten critical actions for starting a business and protecting what you build.
Choose your Business Registration Format
One of the first steps to starting a business is deciding what form your business should take. Typically, launching a new business requires establishing a formal corporation that's registered with the state. Options range from sole proprietors and partnerships, to LLCs, to corporations and have different implications for taxes, legal protections, and ownership structures. Consult an expert to determine what's right for your individual business situation and long-term business goals.
Determine if you Need a Business License
Depending on what type of business you're operating, you may be required to have a state, federal, and/or local business license. In certain areas, something as straightforward as writing or doing graphic design from a home office requires a license. Determine what your obligations for a business license are and file for the appropriate ones.
File For an Employer Identification Number
An employer identification number (EIN) is a number that's provided by the Internal Revenue Service (IRS). 1099s and other payments that are issued to your business will be tied back to this number. You'll need your EIN when you pay quarterly taxes, provide signed W9s to clients, and file your annual tax returns.
Consult an Attorney
There are numerous steps associated with starting a business that require legal expertise, from determining the right format for your business to accurately categorizing your workers. Having expert legal advice on your team is a smart step to take when you're forming a business. Even if you can't afford to keep a lawyer on retainer, pay for an initial consultation and keep their information handy for when and if you need advice or representation.
Hire an Accountant
One of the most essential members of your team is your accountant. They can assist with everything from tax planning and filing to ongoing management of your financial books. New businesses can benefit from accountants at two levels: streamlining the day-to-day operations of the business and providing strategic planning and support. Find someone with experience working with growing businesses, and whose work style is a good fit for your needs.
Assess Ownership Insurance Needs
An area that may be unfamiliar to new business owners is insurance. If something goes wrong with your new business, it's possible that you might be sued, and your personal and professional assets could be at risk. There are a range of business owner insurance policies available, from general liability insurance to errors and omissions coverage. Consult your lawyer and an insurance specialist to determine the ideal coverage for your unique situation and to establish what's within your budget.
Seek Advice on Classifying Workers
Companies with employees have important obligations. Whether you'll have full-time staff, part-time workers, or contractors, there are numerous steps that you'll need to take. Workers can add complexity by requiring you to have insurance, withhold taxes, and other important steps. And misclassifying employees as independent contractors may result in fines and penalties. Determine what you'll need to accomplish at your business and get advice on how best to streamline the process.
Carry Necessary Workers' Insurance
States determine whether companies in their jurisdiction require workers' compensation insurance. Businesses that have more than twenty employees may also be impacted by the federal Affordable Health Care Act. Find out your obligations under the law and work out a plan for insurance coverage.
Protect your Data and Security
What plans do you have in place for data and security protection? From your company's financial information to your clients' or customers' privileged data, it's important to have security protocols in place. These range from employee policies on handling data to the right technology tools to secure your network against hackers.
Plan For your Long-Term HR and Payroll Needs
Managing the day-to-day financial affairs of your business is essential. Whether you have staff or you're simply paying yourself, it's important to streamline activities such as processing payroll, withholding taxes, and complying with employment regulations. Consider partnering with an experienced HR services provider who can offer guidance on how best to address these needs on an ongoing basis.
Launching your own business is an exciting time. Take the necessary steps to ensure that your business is secure and protected over the long-term. Advanced planning on issues like business structure, insurance, and taxes will pay off dividends over the life of your business.