Have you been dreaming of starting your own business? Feeling balked at the legal complexities of getting it all started?
In this Q&A session we are going to assume you know what business you are getting into and how to at least start running it. But there are all these damn rules …
Q: So where do I start?
A: If you do a web search you will often be told you need to write a business plan or obtain financing. For lots of businesses and independent contractors this is not necessary (yes, independent contractors are considered to be a business by most authorities and follow the same rules). Step one is to get a business license if required.
Q: How do I get a business license?
A: This is difficult to answer only because cities, counties and states have their own rules. Some locations require a license for all businesses while others may only register certain types of businesses. Don’t neglect this step. Research this carefully and obtain the necessary permits to avoid later trouble.
Most cities and states provide this information on the web. The Small Business Administration website might be a good place to start. See here:
https://www.sba.gov/starting-business/business-licenses-permits/state-licenses-permits
Q: What’s next?
A: Get a dba if necessary. This stands for “doing business as”. It is alternately called a “fictitious business name” or an “assumed business name”. You will generally need one if your business name is anything other than your own name. Trilobyte Construction would need a dba whereas John Smalley, Contractor might not – that is if your name is John Smalley. But check with your local government to be sure.
To get a dba you would normally need to file an application with the property authority and run an ad in a local paper. The cost for the whole thing is often around $100-150 but might be more or less.
NOTE: When you have obtained the necessary business license(s) and dba you may be good to go. If you decide not to incorporate or form an LLC you will default to being a sole proprietor. Sole proprietors report their business activity on Schedule C of their personal income tax return. You can always change the form of your business at a later date.
Q: Do I need to incorporate?
A: You probably don’t need to although you may want to. A primary reason for incorporating is to get legal protection. If you are not aware of any particular reason to incorporate you can just get started. Incorporation or forming an LLC can be done later.
Q: How do I incorporate?
A: First you will need to file the required paperwork with your state – usually the Secretary of State’s office. Once you receive your approved paperwork you have a corporation. A state ID or file number will be assigned to you. Similar procedures apply to forming an LLC.
You can do this with an attorney or on legalzoom.com. Fees usually range from a few hundred dollars up. Of course, attorneys are more expensive. In most cases there is a filing fee as well as annual fees for as long as your corporation is in existence. This will depend on your state laws.
Q: Do I need a Federal ID number?
A: Yes – if you have formed a corporation or other type of entity or if you will have employees.
No – if you are a sole proprietor without employees. You may still acquire one if you need it to open a bank account, etc.
You can get one online at the IRS website here (no charge for this):
Q: What if I have employees?
A: You will need to register as an employer in your state. This is often separate and in addition to registering for other state requirements.
When you fill out your application for a Federal ID (see prior question) and you indicate you will have employees you will be registered as an employer for Federal purposes.
Summary: It can seem that there are a myriad of obstacles to overcome in getting a business started. I’ve tried to simplify things for you by covering the more important aspects. Hopefully it will help you get these things out of the way so you can get on with your real business.