There are many reasons that keep people from starting a small business and taking control of their lives. I want to give you nine steps that you need to follow when initially starting a small business. The goal of this is to relieve anxiety caused by the fear of the unknown in regards to state and federal agencies.
I know that we all dread dealing with these grand bureaucracies but just consider it a necessary evil and move on with life. Rule number one, don’t let a government agency shut you down due to a paperwork issue. Please note that this information is geared toward starting a small business that seeks some form of liability protection and is not operating as a sole proprietorship.
Starting a Small Business in 9 Steps
- Register with the Secretary of State.
When starting a small business, you must organize your business as an entity. Most commonly this will take the form of an LLC, Partnership, or Corporation. Most often the state will have the registration information and forms on their website.
- Contact the Internal Revenue Service (IRS) to obtain an Employer Identification Number (EIN).
The Employer Identification Number (EIN) is essential to many business activities. Please see additional information and an online application available at www.irs.gov, under Businesses.
- Open a Bank Account.
It is essential that you separate your business and personal money. When starting a small business, always open a business account where you deposit income and pay expenses related to your business activity. You will need your EIN to open a bank account.
- Contact the State Department of Taxation.
Next, register with the State Department of Taxation at their website or download the appropriate reports to mail. Normally, the State Department of Taxation can assist businesses in determining state and local tax obligations.
- Report Newly Hired and Re-Hired Employees to the State Reporting Center.
Most states require that new businesses report new hires within 30 days. To make the process easier, some states have this process automated through their webpages.
- Contact the State Bureau of Workers’ Compensation.
If your business has an employee it must register for workers’ compensation coverage. This will protect your small business from employees getting hurt while on the job. Also, note that S Corp. owners are required to obtain workers’ compensation coverage for themselves in some states.
- Contact the State Unemployment Office.
Employers may be required to establish an Unemployment Compensation Tax Account depending on criteria that differ from state to state. Visit the your state’s unemployment website for information but be aware that many states have a combined state withholding and unemployment tax account form.
- Obtain the proper licenses and permits.
Depending on what type of business you are starting ensure that you do not have to obtain a professional license or special business permit to do business in your state. In addition, contact your county and local government to determine if any special requirements exist for your type of business.
- Finally, Set up tax estimate accounts with EFTPS and the State.
When starting a small business, it is imperative that you pay quarterly tax estimates. The IRS uses the EFTPS (www.eftps.gov/) system for tax payments for all business types. Normally, each state will have a similar website through which tax estimates can paid.
What other paperwork roadblocks have you experienced when starting a small business?