Beginning Your New Business
Maybe you have this gut feeling that your hobby would make a great small business, but you just don’t know where to get started. Small businesses make up over 99% of the businesses in America and approximately 543,000 businesses are started every month. Many people are drawn to the entrepreneurship and creativity that comes with starting one's own business. However, there are many steps to take when your new business begins. If you are looking to gain a little bit of insight of how to take the leap, below are some of the first steps to get your business rolling. (TIP: Making your business legal is best to work out with a qualified accountant or attorney. Hiring someone to help with these licenses and legal structures is highly recommended when starting a new business.)
1. Develop a Plan
Try and get a clear vision of what you want your business to look like or how you would like to see it grow in 5 years’ time, 10 years’ time, etc. Do you want to do this business alone or is there someone who will be helping you? This is also the time to do some market research and make sure the area you are in can support a business plan like the one you would develop. Figure out what your goals are for your business and write a clear plan on how you will get there.
2. Decide on a Business Entity Structure
The business structure you choose for your business is very important and will determine how you will be taxed and what paperwork you will need. LLCs, S-Corps, C-Corps, Partnerships, Sole Proprietorships, etc. all get taxed differently, depending on the number of members/owners, etc. and if you notify the IRS that you want to be taxed a certain way.
3. Obtain an EIN number
An EIN of Employer Identification Number is a requirement for almost all business structures. An EIN is good to have as soon as you begin your business. An EIN will help you file business taxes, hire employees, prevent identity theft, open a bank account, and has many other benefits.
4. Get ready for Business Taxes
According to the IRS there are 5 types of business taxes. It would be best to speak with an accounting professional to find out which ones apply to you best.
The ones that pertain to most business structures are...
Income tax: like individual tax returns that need to be filed annually, businesses also need to file annual income tax returns. Based on the type of business structure you set up, this determines when your business return is due.
Estimated tax: Taxes typically must be paid as you earn and receive income throughout the year. Typically, those who are expected to owe $1,000 or more in taxes should pay estimated taxes.
Employment tax: If your business starts to grow and hiring employees is next on the checklist for you, you as an employer will have certain tax responsibilities and forms that will need to be filed.
Depending on what kind of business you are opening you might need to also pay excise tax or self-employment tax.
5. Keep Good Records
When you begin running your business, there will be expenses and there will be income. There may also be loans, checks, invoices, and deposits. Some businesses will outsource bookkeeping to keep their books clean and tidy. Keeping your books tidy can help determine the progress of your business. A good accountant can look at your books and help make analytical projections to help you see where your business is going including a cash flow analysis.
Thinking about taking the risk and starting that business? Call our office and we can help you develop a business plan, figure out how to classify your business, and walk you through all the steps. Once your business is running and generating income, we can assist you in making tax payments and maintaining cash flow. What are you waiting for? Start your dream business today!