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More Details:Well, its about that time. You cannot go much further in planning your business venture without taking care of all the legal and foundation matters.
Yes, its those icky taxes, licensing, etc.
Now that you have your location, you need to make sure you have your business license and your tax licenses. You also need to get your insurance in place, get your accounting methods established and decide if you want to be a corporation or sole proprietor. While you are at it, make sure you have socked in your web domain name.
Which one to do first…wow, so many important things that need to be addressed.
Legal Matters
I suggest you contact an attorney first. Discuss with him what affords you the best legal protection. Are you going into this alone or with a partner. What is your legal liability as a sole proprietor, partnership, corporation, etc. You need to look at limited liability in order to protect yourself and your personal holdings should something happen to your business or partnership.
He or she will be able to advise you best and also help you file appropriate papers and pay the necessary fees. You don’t need a high priced lawyer, but you do want one who is familiar with business law and liability.
Business Licenses
Once you have that done, you are ready to file for your business license.
Remember, some countys/cities do not require business licenses for small home studios; but anytime you enter into a retail rental contract you will most definitely be required to have a business license. IF your county/city does not require a license, then ask them for a letter of waiver. You will need this in order to establish that you are indeed operating a business. Some wholesalers will demand proof, others will not.
Sales Tax Licenses
Now you have your business license. It is time to apply for your Tax license. A tax license is filed with the state and authorizes you to collect sales tax. Once you have that license, you will need to file reports in a timely manner even if you are not bringing in any income. Failure to do so can result in steep penalties.
Please note here, that if you are operating a small in-home business, you may not need the lawyer, or the business license; but you will need the Sales Tax license.
As a business, with this tax license, you qualify to purchase goods for resale and do not have to pay the sales tax until you sell the items where upon you will be collecting tax on the resale amount. Some small businesses opt to pay the sales tax as they go along - then they are able to subtract that amount from the amount they have to pay the state when they file their reports. There are certain tax advantages in doing so.
Internal Revenue Service and State Taxes
You may remember at the beginning of this seminar, I mentioned the IRS. Well, it is definitely time that you find an accountant and have them help you establish a record keeping system and help you learn what documents and records you will need to keep in order to make Uncle Sam happy.
You will need to secure IRS forms to file your withholding and other tax liabilities. This will also give you a Federal ID number. Sole proprietors can use their Social Security numbers, but I recommend you go ahead and get a separate Federal ID Number. You have to file these forms for yourself even if you don’t have any employees.
Similarly, you will need to get State forms for filing state withholding for yourself and any possible employees. You most likely will need to pay SUI (State Unemployment Insurance) also. Your Accountant/consultant should be able to help you secure all the items you will need for both State and Federal reporting, or at least guide you to where you may obtain them yourself.
Accounting
As a small business, you can do your own accounting, but I strongly advise and encourage you to at least hire an accountant as a consultant to help you get things set up. You may also want to use them annually or even quarterly to at least file your taxes for you.
I encourage you to find a good point of sale computer program. There are some designed for retail businesses; but if they prove too costly, you need to look for a sound, basic accounting program like Quicken or Quick Books. These can seem overwhelming to set them up; but once you do, they will more than pay for themselves in the time they ultimately save.
I cannot stress enough that you discipline yourself to record the various data on a frequent basis and that you do not allow yourself to fall behind or you will be mired in a pit so deep you will literally tear your hair out. A couple hours a week should be a reasonable expectation of time spent once you get your POS (point of sale) program set up. A good POS will keep track of your inventory, generate sales receipts, notify you when to re-order stock, keep good customer records, employee records, sort your taxes and many other tasks that would normally keep your head spinning.
Leases
NOW you can sign your lease agreement. Have your lawyer check it over and make sure there are no hidden pitfalls and hopefully an escape clause. You want to strike the best deal you can; but you need to also ensure some kind of protection should things not work out the way you hope/plan. Look at renewal terms and options, notifications, liability, etc.
Insurance
Now that you know your location and lease terms, you will want to secure appropriate insurance, not just for loss of content; but also for liability. Many things become your responsibility once you take on a lease or rental agreement. You not only have to ensure the contents; but sometimes the structure and always liability for injury of yourself, employees, customers and even passers by.
Web Domain
Whew! Oh, did I mention to secure your web domain? Now is a good time to get it secured if you haven’t already. You can set up your site another time; but you do want to secure the name of your business for a web presence.
Watch for Session Five, coming soon. From here on out, it is FUN!
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