Seven Key Steps to Take If You Are Starting A New Business
by Danielle Mozingo
Starting a business is an exciting process, but it can also be a confusing one. There are an overwhelming amount of factors to consider and decisions to make before the business itself even exists. While your business is still in its infant stages, be sure to complete the following tasks outlined below. Keep in mind that this list is not exhaustive, and the details may vary depending on the state your business is in. Consult with an attorney for individualized advice based on your circumstances.
Make a business plan.
Making a business plan is a valuable exercise for businesses of all sizes and structures. A business plan gives information about your business and outlines your business's financial, marketing, and structural plan. Consider including these things in your business plan: (1) a general overview of your business plan; (2) a description of your company and the market your business serves; (3) a marketing analysis based on thorough research of the industry, market, and competitors; (4) a snapshot of how your business will be organized and managed; (5) a description of your product or service and the benefits it could provide to potential customers; (6) a description of your marketing and sales strategy; (7) financial projections; and (8) any additional information that may be needed by an organization providing funding, if applicable. Once you've written your business plan, be sure to review it annually and update it to keep your business on track.
Choose your business structure.
The business entity you choose will affect how your business is taxed, who holds legal and financial liability, and who has decision-making authority. For this reason, it's important to make an informed decision and choose your business structure carefully.
A sole proprietorship is a business that is owned and operated by an individual. The business and the business owner are considered one and the same, meaning the owner is legally responsible for his or her actions. This also means that all profit or loss belongs to the owner. Because the business is not taxed separately, the business's profits, losses, and expenses will be considered the owner's income.
A general partnership is formed when two or more persons share ownership of a business. The partners share its profits, losses, and management. All partners are held legally responsible for the actions of all partners. In North Carolina, a partnership must report the income, deductions, gains and losses from the business. The business does not pay income tax; rather, the business "passes through" any profits or losses to its partners. Each partner must report their share of the business's profits or losses on his or her tax return.
Limited Liability Partnerships (LLP)
Similar to a general partnership, an LLP is composed of general partners. Limited partners are allowed to contribute with a limited amount of liability, but they also hold a limited amount of management control. Limited partners cannot be personally liable for more than the amount they invest.
A corporation is a separate legal entity from the business owners. Owners are generally protected from personal liability. There are three types of corporations: S-Corporations, C-Corporations, and limited liability companies (LLCs). Some of the major differences between the types of corporations involve taxation, and shareholder requirements and compensation.
Obtain any required licenses or permits.
Almost every business is required to obtain a license or permit in order to operate legally. Depending on your business type and occupation, you may need a business license, a permit or certification, an occupational license, and/or a privilege license. Requirements for North Carolina business licenses can be found using the NCBOLD's online database.
Be sure to meet federal, state, and local business license and permit requirements. Failure to meet these requirements may result in fines and even the closure of your business. Keep in mind that permits and licenses must often be renewed, and some must be displayed in a certain location.
Be aware that there are also environmental permits and zoning requirements, depending on location and types of businesses. Contact your local city, county or municipality for area-specific license requirements, or call Business Link NC at 1-800-228-8443 to learn about these licenses.
Obtain an EIN (Employer Identification Number) for your business.
An Employer Identification Number (EIN) is a federal tax identification number. Most businesses are required to obtain an EIN, such as businesses that have employees and businesses that operate as a corporation or partnership. Applying for an EIN is free, and you can apply online using the IRS website.
Register your business.
The type of business structure you choose will determine how you should register your business. Be aware that a fee may be charged upon registration.
Sole Proprietor or General Partnership: Select your business name. If operating under an assumed name, file an Assumed Business Name Certificate with your County Register of Deeds.
All Other Business Structures: You must register with the NC Secretary of State. C-Corps, S-Corps, and Nonprofit Corporations must file an Articles of Incorporation. LLCs must file an Articles of Organization. Limited Partnerships must file a Certificate of Limited Partnership.
Consider whether your business should have intellectual property protection.
Some of your business's intellectual property will include, but is not limited to, your business name, logos, ads, jingles, products, packaging, and designs. By patenting your products or registering any trademarks or copyrights, you can protect your intellectual property from infringement and gain a competitive advantage over other businesses. Before attempting to trademark your business’s intellectual property, make sure it is available by searching for it in the U.S. Patent and Trademark Office’s trademark database. This website will inform you if someone else has already trademarked the name, design, or symbol you want to use.
Ask for help when you need it.
Don't let the challenge of starting your business prevent you from reaping the benefits. If you encounter any difficulties with any of the above items on the checklist or need legal advice for launching your business, the attorneys at Smith Dominguez are here to help you.
Click here to schedule a free consultation.
About the Author
Danielle Mozingo is a law clerk at Smith Dominguez, PLLC and a second-year law student at Campbell University Normal Adrian Wiggins School of Law. During her time at Campbell, Danielle has been involved in a variety of pro-bono projects including the Campbell Law Innocence Project, the Domestic Violence Advocacy Project and the Reentry Project. Danielle has also served as a court advocate for the Safe on Seven Domestic Violence Center in Winston Salem, NC.