"Startup Roadmap" - Step One
Are you ready for the first exciting steps toward making your business plan a reality? This is the sixth in a series of columns that provide several helpful business topics for the new small business. It is based on one of SCORE’s recent projects that was developed with the help of and in partnership with FedEx. This project is called “Startup Roadmap” and outlines every step in starting a business. A SCORE mentor may use this program to help you reach your goal smoothly.
In a previous column, I discussed the business plan. Now let us consider five Key steps in making that plan a reality. These tasks are very straightforward, but you do have some decisions to make.
Step 1: Choose Your Business Name. Your business name is the cornerstone of your business. It identifies your business legally, distinguishes you from the competition and forms the foundation of your brand.
Start with a web search to see if anyone else is using the business name. If not, check to see if the business name you want has been registered in your state by visiting the website of the state agency that handles business entity filings. They generally have a search feature you can use. You can check if your business name is available to trademark by visiting the U.S. Patent and Trademark website.
Once you’ve narrowed down your list to a few business names, see what other people think. Ask your SCORE mentor and your friends and family. Then get feedback from prospective customers.
When choosing a business name, it’s important to understand the difference between a business name, a DBA and a URL.
Step 2: Choose a Business Structure. The business structure you select for your business has legal, tax and administrative implications for your company’s future as well as your own. In this step, you’ll assess the different options, think about your long-term vision for your business as laid out in your business plan, and choose the best business structure to support your goals.
Here are the most common options for business entity formation.
- Sole Proprietorship or Partnership
- C Corporation
- S Corporation
- Limited Liability Company (LLC)
Talk to your SCORE mentor about your business entity options. Your mentor may also be able to connect you with other experts in your community who can provide advice and assistance.
Once you’ve made your decision, complete the filings, registration, and paperwork required for your chosen business structure.
Step 3: Apply for a Tax Identification Number. Depending on your business structure, you may need to apply for a federal Employer Identification Number (EIN). Also known as a FEIN, a Federal Tax ID or a Federal Tax Identification Number, this is what the IRS uses to identify your business (similar to a Social Security number for individual taxpayers).
If your business is a sole proprietorship without employees, you don’t need an EIN (you use your Social Security number instead). If your business is a corporation or partnership, or if you have employees, you need to get an EIN. Applying is free and can be done online.
Some states may require you to get a state tax identification number as well.
Step 4: Get Necessary Licenses and Permits. Getting the business licenses and permits required by your location and industry ensures you are in compliance with federal, state and local laws, so your business startup can proceed smoothly. Without this paperwork, you might have to pay fines, delay your progress toward startup or even be prevented from starting your business altogether.
Federal Licenses and Permits. Your small businesses won’t need federal licenses or permits unless you are engaging in an activity that’s regulated by the federal government.
State and Local Licenses and Permits Licensing and permitting requirements vary depending on your location and industry. Start by visiting your state, city and county websites to see what types of licenses and permits you need.
Once you obtain your licenses and permits, be sure to note when they expire. Many licenses and permits are good for only one year, at which time you have to reapply and pay the annual fee. Keep track of your renewal deadlines so your business remains in good standing.
Step 5: Open a Business Bank Account. Corporations are required to open business bank accounts. But even if you are operating as a sole proprietor, setting up a separate bank account for your business has many benefits.
It makes your business appear professional to customers, suppliers, and others, which makes them feel more confident about doing business with you. Using a business bank account for your business income and expenditures also helps you keep business and personal finances separate. This is important for tax purposes, and also makes it easier to do your bookkeeping and manage your business spending. In addition, business bank accounts typically include features that personal checking or savings accounts do not, such as the option to open a line of credit or to get a business credit card.
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