Starting a business takes time, dedication, hard work, and money. As a future business owner you’ll need to ask the right questions, and follow the right legal guidelines in order to be successful.
Our starting a business checklist will help you to understand where you are and where you have to go once you have decided to start your company.
Business Startup Checklist
1. Decide on the legal form of your business:
- Sole Proprietorship
- Limited partnership
- Subchapter S Corporation
- Subchapter C Corporation
- Limited liability company
2. Decide “home” of business and file appropriate forms (all legal entities):
- Choose the state in which business is a “resident” and comply with all filing requirements for states
- Complete tax filings (Federal Employee Identification Number (“FEIN”), federal income, states sales, etc)
- Complete any occupational permits required (e.g., barber’s license)
- Complete environmental filings (if required, check with your state and local governments)
- Complete city and county filings (local and state governments often require business permits or other filings, so call your local and state government small business offices)
- · obtain city permits
- · obtain county permits
- notify health departments of city/county (if necessary)
- Filings required for operation in states besides “home” state
3. If you are creating a corporation:
- Pre-incorporation subscription agreement for equity interests if there is more than one owner (one page form usually)
- Reserve corporate name with secretary of state
- File articles of incorporation
- File the subchapter s-corp election (Form 2553) with the IRS (if applicable)
- Obtain minute book, corporate seal and stock certificates
- Execute shareholder agreements and other organizational documents
- Approve board of director initial meeting/organizational minutes
- Have board approve the minutes electing the corporate officers and directors
- Issue stock certificates to shareholders who have paid for the shares
4. If you are creating a partnership:
- Draft partnership agreement
- File partnership taxation election form with IRS
- File certificate with state (if necessary)
5. If you are creating a limited partnership:
- Determine who (or what entity) will be the general partner and who (or what entities) will be the limited partners
- Draft limited partnership agreement
- File limited partnership taxation election form with IRS
- File certificate of limited partnership with state (if necessary)
6. Accounting Concerns:
- Hire an accountant
- Obtain federal employee identification number
- Open banking accounts (and determine who can sign checks)
- Start keeping receipts
- Establish record-keeping practices, including payroll
7. Financial Concerns:
- Estimate costs for initial advertising, fixtures, decorating, inventory, professional fees, and ongoing monthly expenses (rent, utilities, etc.)
- Estimate monthly income (be very, very conservative)
- Estimate and budget for consultants, lawyers, accountants needed
- Begin establishing a relationship with bankers for future loans
- Obtain insurance
- Obtain FEIN number (we know we mentioned it before, but it is important)
- Obtain forms: INS & Worker’s Compensation
- Draft employee employment agreement (if necessary)
- Prepare non-competition agreements (if necessary)
- Prepare job descriptions
- Payroll records established (and maintained!)
- prepare employee manual (if needed)
10. Buying a business
- How is local/national economy?
- Family support decision?
- Reason (career change, money, right opportunity, etc.)
- Alternatives to purchasing the business (other investments offering better return, partnering with other investors, etc.)
- Will you be able to get financing for purchase, continuation of operation, etc.
- Do you have sufficient resources to continue operation after purchase?
- DETERMINE WHAT IS BEING BOUGHT!
- Select advisors to help organize purchase business: lawyers & business broker/appraiser
- Appraise the rough value of business before making an offer:
- determine years of successful operation/goodwill
- determine if key personnel are needed for operation
- examine condition of facilities and equipment
- talk to customers and vendors
- gauge worth of current location
- investigate competitors
- value trademarks/patents/trade secrets/copyrights
- investigate economic trends in industry/region/nation/world
- can you add substantial value to business through expertise, resources or economies?
- employees/labor matters
- key employees necessary to business
- union labor involved
- Determine preferred allocations among assets to maximize tax benefits to buyer
- Record all social Security numbers of employees
- Track income tax (on business)
- Track self-employment tax (on owner)
- Track (and pay!) employment taxes (on business and employees)
- Track state and federal excise taxes (on products and services of business)
- Buy tax/accounting software
12. Entering into Contracts for the Sale of Goods/Warranties
- What are goods?
- Understand what are the legal requirements for a contract?
- Written contracts vs. oral contracts
- What constitutes delivery of goods and what constitutes acceptance?
- When does risk of loss pass?
- Seller’s remedies in contract?
- What will happen in the event of failure to deliver goods?
- Hire employees
- Learn how not to engage in illegal discrimination
- Learn how to properly terminate employees
- Comply with federal labor laws
- Protect your business from competition by employees