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Thinking about making the jump and starting-up your own small business?

New Business Checklist: Steps You Don’t Want to Forget
This article is written and owned by Stephen Nelson

Thinking about making the jump and starting-up your own small business?”
Checklist Item #1: Choose the Right Entity

You can operate your business in a variety of ways.
Individuals, for example, can operate as solo proprietors, corporations or LLCs. And teams of two or more people can operate as partnerships or as corporations or LLCs.

You’ll want, therefore, to spend some time and do a bit of research about the appropriate entity format. As a general rule, very small businesses operated by the owner do just fine if they pick the sole proprietorship format. Larger businesses or businesses with multiple entrepreneurs or multiple investors often want to use the corporate or limited liability company format.

Note: Small businesses often wonder about the S corporation option, too. But an S corporation isn’t actually a real corporation. A “Subchapter S corporation” refers to a corporation or LLC that’s elected to use a particular and sort of peculiar set of tax accounting conventions.

Checklist Item #2: Get Any Needed Business Licenses

After you identify the right entity–sole proprietorship, for example, or limited liability company–you need to get any required business licenses. Often, you’ll both need a state business license and a local city or county business license.

An important point: The right entity needs to get the business license. For example, if you’re operating as a sole proprietorship, you (the proprietor) need the business license. But if you or you and a buddy are operating as a limited liability company, the LLC needs the business licenses.

Note: If your firm will operate outside your home state, you will need business licenses in the “other” states. If you’re a corporation or LLC and you do business in multiple states, you business will also need to register as a “foreign” entity (a “foreign corporation” or a “foreign
LLC”) in these other states.

Checklist Item #3: Setup a Simple Accounting System

You need a decent accounting system. Tax laws require an accounting system. And so does common sense. As a CPA serving small businesses, I promise you your chances for success increase if you have a decent financial management system. You’ll also save lots on taxes because you won’t forget about tax deductions.

Microsoft Excel, by the way, doesn’t really work as an accounting system. (Don’t get me wrong. Excel is a great spreadsheet. But it’s not an accounting system.) What you want to do is either use a checkbook program like Quicken for Microsoft Money. Or you want to step up to a full-fledged small business accounting program like QuickBooks or Microsoft Small Business Accounting.

Don’t spin your wheels trying to pick the perfect, inexpensive accounting program. All of the popular programs work great. The biggest mistake you can make about small business accounting software is delaying getting your system up and running.

Checklist Item #4: Comply with the Bureaucratic Red Tape

With the right entity setup, your business licenses in hand, and a simple accounting system in place, you’re ready to operate a small business. But you’ll want to keep track of one other to-do list item: complying with the on-going bureaucratic red tape prescribed by federal and state government agencies.

Both the federal and state government, for example, wants you to estimate your annual income tax liability–and then to make quarterly estimated tax payments on April 15, June 15, September 15 and right after the end of the year on January 15. You make these payments using the federal 1040ES coupon (available from the www.irs.gov web site) and the equivalent state estimated tax payment coupon.

In addition to on-going tax-related paperwork, you’ll probably also have to stay on top of your state and local business license paperwork. And you may have excise tax (sales tax) returns to file if you collect and owe state or local sales taxes.

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Seattle tax accountant Stephen L. Nelson specializes in tax planning for small businesses. He also edits the popular do-it-yourself incorporation web sites, http://www.scorporationsexplained.com and http://www.llcsexplained.com .

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” Everything Comes to Him Who Hustles While He Waits.”
- Thomas Edison

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