So you want to start a small business and you don’t really know what steps to take? Well, I’ve got some good news coming your way: you only need to take a simple first step and the rest will follow. So here’s how you can get passed all the red tape or the administrative hurdles way faster than you’d ever think.
A close friend kept talking for months on end that he wants to start a business. Every time I met the guy, he kept going on and on again about it. So I finally asked him: “Just what exactly are you waiting for?”. Well, as it turns out, he was under the impression that starting a business is like trying to juggle with nitroglycerin. Just like many entrepreneurs before him, he felt intimidated and overwhelmed by the complexity of the legal and administrative hurdles that he had to go through to start a business.
You should keep in mind that I’m not going to tell you how to write a business plan, how to develop a marketing plan or how to get funding, but rather the actual steps you have to take to start your own small business. So, here’s how you can do it in no time:
1. First of all, don’t obsess over finding the perfect name for your company. How many of you have been stressed out because you couldn’t find the ideal name that describes your company to perfection? Well, my advice for you is: Don’t! Take this into account: the faster you come up with a suitable name, the faster you start seeing some profit. For the time being, don’t think about branding and unique ways in which to sell propositions. Additionally, don’t take too much of your time with finding the perfect web design or the perfect URL, you would only be getting ahead of yourself. Just choose a name and get the administrative process going. In case you were unaware of this, the business can operate under a different name than that of your company and you could always change it afterwards.
2. Next you should get your Employer Identification Number (EIN). The EIN is the federal tax number that is used to identify your business. You should also know that you don’t need an EIN if you don’t plan on having employees or forming a LLC, a partnership or a corporation. Here’s a tip for you: get an EIN anyway. Why? It’s free, it only takes a couple of minutes of your time and your Social Security Number (SSN) remains private, which, in turn, reduces the chance of being a victim of identity theft. Another reason is that if you don’t have an EIN, the SSN is able to identify your business for tax purposes. By the way, if you choose to use an online legal service to start an LLC or corporation don’t use it when you get your EIN. My advice to you is to apply for one online at the IRS website and you’ll have it in mere minutes. Next up, you should make a visit to your locality’s administrative offices.
3. After that you should register your trade name. If you choose not to operate under your name, your locality may ask you to register a trade name and, typically, you will get it approved instantly.
4. Depending on the city or country where you live, a business license may be required. The good news is that it takes only a couple of minutes to fill out. For privacy reasons, choose to use the EIN instead of the SSN to identify your business. Although it may be required that you estimate annual gross receipts, don’t worry too much over it. Just try to estimate as accurately as you can. After all, you’re just estimating.
5. It may be necessary in some parts of the world to fill out a business personal-property tax form. Just like in the case of individuals, businesses are taxed as “personal” property. In my region, no such form needs to be completed for the first year of the business. Maybe you want to work from home using your own computer, tools or other belongings that may already be yours. If this is the case, you can leave them out of the form. Let’s say that during the first year of your business you choose to purchase some personal property. Only the following year will those items be listed in your business personal-property tax form.
6. Given the fact that almost every locality has different requirements you must meet, my advice is to ask the locality about other permits. In my city, you are required to have a “home occupation permit” which states that a home business is up to the zoning requirements. That is why you should always ask your locality about other permits.
7. It may be necessary to get a certificate of resale. You may also know it as a seller’s permit. This allows you to collect state sales tax on products your company sells. One interesting thing you should know is that there is no sales tax on services. So, if you decide that you business will sell products, go ahead and get a seller’s permit. You can easily find all the additional details and forms you need on the department of taxation’s website. Some of them may let you apply online, but in some localities you can fill out the forms during your visit at their administrative office.
8. Try to stay away from combining personal funds with business funds. If you don’t want the IRS knocking on your door, get a business bank account at the bank of your choosing. You should also check out the local credit unions. The main reason to do this is that often times they offer better deals than banks.
9. Last but not least, create an accounting spreadsheet. Leave the accounting software aside for the moment and focus on creating a simple spreadsheet in which you enter the money you gain and spend. Many people complain that bookkeeping is hard. In fact, you only need columns for the Revenue and for the Expenses. If something else comes along the way, you can simply add another column. Don’t worry about creating the perfect spreadsheet that has no data in it. Focus on generating revenue. At the end of the day, that’s the main goal. Stick to the simple spreadsheet for now and, when the time comes to switch to a formal system, you’ll see how smooth the transition will prove to be.
So, that’s it. Simple enough, right? Now you’re an entrepreneur and have the knowledge to prove it. Good luck!