Name of business

The name of your business is important to identify your business, distinguish your business from other businesses, and help establish a relationship between your business customers, service providers, and the community you operate in.  Soon after coming up with a name, you should contact the business xxxxxxx of the state you plan to designate as your home to see if the name you have chosen is available.  This will help prevent confusion of your business with another business and having to perhaps change the name of your business in the future.

Business Structure

A business structure is the legal form that a business operates as.  A business can be a sole proprietorship, for-profit corporation, non-profit corporation, partnership, or association.  A sole proprietorship is an unincorporated business that is owned and operated by an individual or small group related individuals (such as spouses or siblings).  A partnership is a business structure in which two or more persons agree to contribute money, property, labor or skill to carry on a trade or business and share the profit/loss.  A corporate structure should be used when the business operators want to shield themselves and personal assets from liabilities of the business.  The organizers of the business must obtain permission to operate as a corporation from the state chosen as the headquarters of the business.

One way to choose a business structure is to determine whether taxes of the business will be paid by you as a sole proprietor, each partner, the corporation, or shareholders.

SSN or EIN

A social security number (SSN) and employer identification number (EIN) is the identification number for the business.  A sole proprietor can use their SSN for business purposes but should consider obtaining an EIN to help distinguish the business activities from the personal affairs of the owner.  Corporations are a collection of owners and therefore must use an EIN to establish a single identity of all the owners of the business.  The EIN is also used for partnerships to establish a unifying business endeavor that it separate from the partners personal affairs.

Books and Records

Maintaining books and records is important to show structure, operations, responsibilities, rights, duties, income, expenses, assets and liabilities of the business.  Books and records should be maintained on a frequent and consistent basis to minimize time and expense when demonstration or proof of business activity is needed for current operations, new opportunities, financing, investing, and taxes.  Books and records should be maintained in a manner that is understandable to the individual(s) who may be called on to answer questions or explain business operations.

Accounting and Finance

Recording income when earned and expenses when paid/incurred is important to knowing the financial health of the business.  An accounting of income and expenses should occur daily, weekly, monthly, quarterly, and annually to better understand the parts of the business that are profitable, need additional resources to make profitable, or that should be discontinued.  Knowledge of the business’ financial health should help to understand how financial agreements and investments will impact the net profit/loss of the business.  Responsible and trustworthy individuals should be used to prepare accounting records and advise on finance and investment agreements.

Taxes

It is important to know the type of federal, state, and local taxes that the business may be liable to pay.  Federal taxes include income taxes and payroll taxes such as social security, FICA, FUTA, and Medicare.  State and local taxes include income, sales, use, and real estate.  Most taxes are due quarterly, with an annual reporting due usually within four months of the end of the tax year.