Starting a Business Checklist: 5 Considerations for the New Business Owner
Updated: Aug 15, 2021
Starting a business is unfortunately not as simple as going to a website that permits a quick filing in the state of your business, submitting a minimal fee, and hitting submit. Sure, this is a very common way many business owners file to open their business. I am not saying this is always incorrect. However, I am saying there are many considerations to opening a business that can be easily overlooked if you are under the impression everything is fine as long as you your LLC or other entity is formed. You should always make sure your needs and the needs of your future clients are going to be effectively taken care of when opening your business. This is why consulting with an Attorney who can review the big picture is important.
Here are five other considerations you should think about when opening a business:
Why are you starting a business? This is a question that can sometimes be brushed off and overlooked. Starting a business is hard. Running a business is more difficult. Staying in business is the most challenging part of all. Make sure you are ready to open a business, have a plan ready to go, and know what you are going to do when times get tough.
Have you researched the business entity you are going to choose or are you just choosing an entity because everyone else uses the same entity? These days, limited liability companies ("LLC's") are all the rage. So many people believe an LLC is all they need to have a successful business. While it may help protect the business owner from personal liability if they are not grossly negligent in the operations of the business, some businesses will benefit from a standard corporate form. But if you are selling paper clips and only intend to make $100 a year, the benefits of opening an LLC do not outweigh the burdens and costs associated with opening and maintaining an LLC or standard corporation.
What tax designation is best for you? If you do choose an LLC, you are considered a disregarded entity by the IRS. Often times S-Corporation status or C-Corporation status is chosen for various reasons related to how your business will be taxed. It is advisable that you consult with a tax professional to determine what is best for your situation. However, generally, an S-Corporation is great if your business is super small with less than 4 partners. A C-corporation is better if your business is larger, if you want to have multiple shareholders, and if you do not want the profits to be counted as personal income.
Can you use the name of your business? Aside from conducting a state business name search to determine if your business name can be used in the business state, you need to conduct a common law trademark search and USPTO trademark search to determine if there are prior rights to utilize your business name for the same or similar goods or services. A Trademark search is often overlooked when starting a business. You may say that you will worry about a trademark later on in the process. This can be a fatal mistake in many instances which will require backtracking, rebranding, and many tears later on for your business.