set up a corporation. However, it is simple in most states to set up an LLC (Limited Liability Corporation,) the most common small business corporate structure. You may do it yourself in less than an hour for a fraction of what your attorney would charge. However, you might want to consult with your attorney relative to the type of organization structure that would work best for you in light of the plans for the company.
Accountant - Every new company should develop a relationship with a CPA firm. They will have a point of view as to the type of organization structure you form, and also will oversee the work of your bookkeeper. The accountant is also a very helpful resource to prepare tax reports for the city, state and federal governments as required. They also will be very helpful to you in helping you determine what types of expenses can legitimately be charged to the business, and what would be challenged if the company were audited.
Bookkeeper - While many small businesses choose to keep their own books, normally to save money, it is generally very helpful to hire a bookkeeper in the beginning to help you set up the accounting system. You can do the regular entry of data, but the bookkeeper will set you on a course that will ensure that the chart of accounts is correct and the other elements of your system are consistent with what would be required by your accountant to prepare your taxes.
Payroll Service - One of the best values in business services is generally the payroll company Even if you only have one person on your payroll, having this executed with an outside provider is a benefit as they will ensure that all the appropriate taxes are paid on time. It is strongly recommended that any new business use this service, as it is a small price to pay for the assurance that you have covered your taxes, and that you do not have to fill out and file the quarterly reports that are required of most companies that have a payroll.
Insurance Agent - A qualified insurance agent is a vital part of any new business organization. More often than not small business organizations have less than perfect knowledge of the insurance needs of their organization. Perhaps the most common misconception is the extent of liability protection that one gets from forming a Limited Liability Corporation (LLC). Because it is a corporation many people do not feel they need to have liability insurance as the owners would be protected in the event of a claim against them for personal injury, product liability or personnel-related claims (i.e., sexual harassment, improper firing etc). The LLC generally protects the corporate entity against contractual issues, and only when the contract is signed in the name of the LLC without personal guarantees.
For the above and many other important issues it is vital that the small business owner work with an insurance agent to ensure that the company is adequately protected from claims against the organization.
Computer/IT Professional - Consider this -it is 9 am on Monday morning and you turn on the computers in the office to begin entering the records from the weekend, but your primary computer will not start, or gives you an error message. In the current environment it is almost impossible to operate a business without a functioning computer system. Therefore you need to have people who are available to you that could solve problems that occur. They always seem to happen at the most inoppor tune moments and you must be prepared!
Advisory Board - While not required, one of the best resources that a new company can establish is an advisory board of senior people who will be available to provide advice and counsel to the company on an ongoing basis. This can be formed from many different sources, such as former colleagues, family, and friends or from organizations such as SCORE. We SCORE mentors provide this type of service to a large number of organizations, with our only goal being the success of the company. In most cases, an advisory board can be formed and operational for virtually no costs, as normally the participants are volunteers, seeking to help you get started.
SUMMARY - There are many options available to the small business entrepreneur relative to the form of the entity. Consult with your attorney and accountant to ensure that you have the right form for your company in your state. A little time doing this in the planning stage will save you many headaches in the future, if you have made a mistake in your choice of business form.
CHAPTER SIX - Legal Requirements When Organizing a Business
Introduction - The purpose of this chapter is to outline the most important legal requirements that a small business will face when organizing. There are some variations by state, which we could not reflect in this chapter, and therefore it is always advisable to communicate with the appropriate local taxing and regulatory authorities when forming a new organization. We will try and cover the key issues that should be considered.
Federal Licenses & Permits - Most businesses do not require special federal licenses or permits to operate. However, if you are involved with any of the following business categories you must contact the responsible federal agency to determine the specific requirements for your type of business:
- Broadcasting
- Drug manufacturing
- Ground Transportation
- Investment advising
- Preparation of meat products
- Selling alcohol, tobacco or firearms
State Business Licenses - Some states will require a license to operate your business, which is for their taxing purposes. Many states have established small business assistance agencies to help small businesses comply with state requirements. As a starter, contact the state Department of Taxation to determine your requirements. Some examples of the types of professions which require licenses are:
- Accountants
- Appraisers
- Auctioneers
- Barbers
- Bill Collectors
- Building Contractors
- Cosmetologists
- Funeral Directors
- Physicians
- Psychologists
- Real Estate Agents
- Private Investigators
- Private Security Guards
If you have a question whether your profession requires a specific license contact your state licensing authority.
State Tax Registration - If your state has a state income tax and you have employees, you have to register and obtain an Employee Identification number. You can apply for this from your state Department of Revenue or Treasury Department.
Federal EIN - You will be required to have a federal tax EIN in order to identify your business to the federal government. This can easily be obtained by calling 1-800-829-4933. You will be able to get your number over the telephone. You can also apply for this from the IRS website.
Trade Name Registration - Most states require some local registration of your business name. We generally suggest you contact the town clerk in your local community to determine the requirements for registering with the state.
Employer Registration - If you have any employees you will be required to file for unemployment insurance. Contact
