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Startup Fundamentals

Aug 5, 2014 | Larry | capitalization, EIN, office in the home, startup | No Comments

One of the more common scenarios I see with new businesses clients is neglect of the first steps of starting a business. Failure to do first things first can have serious tax and legal implications downstream. It cannot be stressed enough; organization is key.

Below is a minimalist list of things to consider BEFORE hanging your shingle. Seek legal and tax advice as necessary.

Legal entity: Before actually starting your business, decide on an entity type. Briefly, these are sole proprietor, limited liability company, qualified joint venture, partnership, and corporation (C and sub S). The chosen structure will dictate how you set up your books, file taxes, and run the business.

Chart of accounts: A list of revenues, assets and expenses.

Capitalization: Funding your business. External funding may require a business plan.

Banking: One of the more egregious errors is failure to establish a business bank account. Open a checking account and get any credit cards you may need for conducting your business.

Federal employer identification number (EIN): These are obtained through the IRS at NO CHARGE. This should be done only after deciding on your legal entity.

Licenses and permits: Be sure and have the necessary license(s) BEFORE offering your goods or services.

Liability insurance: Protect yourself.

Advertising: Business cards, letterhead

Office setup: If considering a home office, be certain you meet the IRS requirements http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Home-Office-Deduction. In short, the area used as an office must have regular and exclusive business use.

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