If you are considering going out on your own by starting your own business you are in good company! According to the U.S. Small Business Administration there are at least 31.7 million companies in the United States with less than 500 employees–the definition of small business. A whopping 25.7 million–more than 8 out of 10–have no employees at all. It’s just the owner versus the world. About 6 million small businesses have at least one or more paid employees.
But no matter which category you fall into, you’ll need to get some basic things in place before you can start doing your thing–you know–that thing it is that you do better than the rest–that thing that people will want to pay you for. First of all, you need to have your license, to do what you want to do. For example, I need a law license to hold myself out as an attorney. That license was obtained after years of study, lots of testing, and eventually a thing called a bar exam which was somewhat grueling. Yes, that was what it took for me to represent YOU. But I digress. Enough about me. (But just as an aside–it was all worth it, because now I get to meet a nice person like you who is on the precipice of greatness! Running your own show! A small business! But hey–it isn’t all fun and games, so let’s get on with it, shall we?.)
Licensing: as I was pointing out to a young contractor the other day, New Jersey requires a license to start a home improvement business. You need a license to sell insurance. You need a license to style hair. But you can google all that.
Next thing to think about is liability insurance for your business. For example, if you’re driving an Uber, you can’t rely upon your household auto insurance policy–you may need something more elaborate. If you’re a house painter and you want to bring along a friend to help carry your ladder and heavy equipment, and your friend gets injured, you had better have worker’s compensation insurance or the fines are quite substantial. So get your quotes to find out if you can afford to start with all the insurance you need.
This is quite an extensive topic, but I’ll stop here and jump into the part where the lawyer comes in. The lawyer can create the documents to turn your idea from a small business into an official business entity with a name and an organization. It can be an organization of one or many, but you need to put it on paper. There are multiple types of entities but, to keep it simple, most people either want to start a Limited Liability Company (popularly known as an LLC), or a Corporation or Sole Proprietorship. Sole Proprietorships should be registered in your County (in New Jersey). LLC’s and Corporations are registered with the New Jersey Department of the Treasury. We, the lawyers, do the registering.
Sometimes you’ll have a business partner, and then it is crucial to prepare an agreement which spells out the rights and remedies of each party (even if the partner is your spouse!). Remember that you may be best friends today, but once the money starts rolling in (and all those bills!) things can get pretty dicey. Money changes everything–isn’t that what Cyndie Lauper sings? An LLC should have an operating agreement. Corporations need articles. It’s all in the fine print. Lawyers do the fine print–that’s why most of us wear glasses. It’s all fun and games until somebody files a lawsuit. Of course, lots of people fail to create agreements when they should and that’s when the lawyers really earn their keep! But don’t let that client be you–get your agreement down on paper at the outset.
You need to pick a name that is unique so your customers know “it’s really YOU” they’re dealing with and not some imposter. The government also needs to know who to look for when it comes time to pay your taxes. There are all kinds of rules about the names you can use when you buy a business from someone else, etc. Should you get a logo? Branding and social media is all the rage these days. Lots of details.
Before you decide on your “entity” type–you may need to consult with an accountant. Anyone who starts a small business should at least consider retaining the services of a Certified Public Accountant (“CPA”) which is a professional who you can consult with on the requirements for annual or quarterly tax filings. There may be state sales tax, federal and state income tax withholding for employees, franchise taxes and other obligations. You may even need a payroll company. Lots of people seem to want to file their taxes themselves, or to use a bookkeeper who has no special training. That may be o.k. if you’re getting a paycheck and a W2 as an employEE, but when you’re the employER (in your own business), that makes a difference. You may miss out on some tax savings without the assistance of a CPA. As your attorney I can make some recommendations and suggestions in this regard. Always ask the cost before you commit!
Finally, I recommend setting up a separate bank account with a debit card to run your income and expenses through. Every time you reach for your wallet, whether you’re buying paint or reams of paper, it should be purchased by a debit card through your business account. Cash isn’t the best option when it comes time to decide what deductions you can take on your taxes and you have a box full or random receipts.
If you need financing, you can talk to your local banker. Always go local! Again–we’ve got plenty of pros we can recommend here as well.
So give our office a call, email or text to let us know how we can help. Let us be your guide to your bright and lucrative future in small business!