The Most Recommended Top 10 Steps to Set Up a New Business
Starting a new business is very exciting! Most business owners began as a hobby and the hobby turns into a business. Many people don't like to sell so they allow clients to say want they will pay. Allowing a client to set a price is selling. If you find yourself selling your products or services you are in business. A for-profit business may call the process of allowing clients to set prices as gifts and receiving "gifts" is counted as taxable income. Gifts allow the giver to give as they can as opposed to a set price as in sales prices. Having a business is challenging but rewarding!
As a business owner, you are now responsible for your salary, your taxes, your business expenses and others (if you have employees or contractors). The hobby is a business and bookkeeping, taxes, payroll, inventory, cash management or owner's withdrawals now apply. You will also need licenses and certain Accounting systems in order to protect your business. Let cover the most recommended top 10 steps to set up a new business. (There are 20 steps however we will only cover the top 10).
1. Select a business structure. Base your business structure on your personal taxes and liability protections. Read 3 Simple Steps to Select a Business Structure.
2. File the paperwork for your selected business. That would include the LLC, Incorporation or Sole Proprietors DBA. Complete the application for your selected business structure with your State Secretary of State Office. File DBA with your County Register of Deeds Office. You will need to search to make sure the name of your business is available. There is a fee associated with filing this status. You can also file for business structure with an Accountant or A Lawyer.
3. Apply for Your Tax Identification Number - The tax id number is the employer identification number. The Tax ID or EIN is an important number. You will file for the EIN at www.irs.gov I apply for the EIN for clients along with filing the business organizations.
4. Apply for your business licenses - Certain towns and cities may require a home office licenses if you work out of your home, as well as a business (privilege) license with the state. Speak with your Accountant or your Lawyer to make sure you have all of the proper licensing.
5. Open your state and federal tax withholding accounts for estimated taxes and/or payroll taxes. Read my blog "Self Employment Taxes and The Small Business Owner" for information about Self Employment and other business taxes. Open the state withholding accounts even if you do not have employees. You will need to report the withholding taxes on the money you pay yourself or withdraw from the business. I recommend estimated taxes and not waiting until the end of the year. There is a penalty assessed a the end of the year for nonpayment of taxes.
6. Open a Sales and Use account if you sell products.
7. Speak with your Accountant to see if you need additional tax accounts for your particular type of business
8. Set up a business bank account. Do not have personal and business expenses in the same account.
9. Select a receipt tracking system. You are required to have receipts to support business expenses in your business. Read more about Receipt Tracking.
10. Select an accounting system. Excel is a great start however you will need automated software as you move forward. Read my blog "Accounting Software Made Easy"
Setting up a business can be stressful. However, relax and seek an Accountants for guidance. You can consult with an Accountant even if you are not ready for bookkeeping. Plan to consult with your Accountant at least 4 times a year for Tax Planning and Quarterly Taxes.