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Five Steps to Starting a Business
By Abe Cherian
Copyright ? 2005
Starting a business can be a rewarding experience, but it
can also be very time consuming and difficult. Many
resources are available to assist you, but information
overload can cause you from moving forward.
Keeping it simple is often the best way of maintaining the
momentum necessary to get your business started. There are
a series of steps to ensure success.
The first step toward getting your business going is
deciding on a name, for example "New York Landscaping."
Any name that you do business under other than your own
given name is called a "fictitious" or "assumed" name, and
certain steps need to be taken in order for you to do
business under that fictitious or assumed name.
Depending on where you live, different government agencies
track which names are available. Look in your local phone
directory, under government agencies to find the number, or
contact your local Secretary of State.
Check to find out if the name you want has been taken. If
it is available, you may need to file a fictitious or
assumed name certificate with the state or local fictitious
name office. Some areas will also require you to publish
a notice in the local paper about your new assumed name.
Both state and federal law regulates the use of names and
"trademarks". To avoid conflicts with other businesses
regionally or nationally using your business's name, or the
names of your products, you may want to consider
registering your trademark on the federal or state level.
Contact an intellectual property attorney for trademark
search and registration services.
The second step is knowing that different areas have
differing licensing and permit requirements depending on
the type of business you are going into. Most businesses
that require a license will have a local licensing
authority that can guide you through the process.
Find out the licensing requirements on federal, state, and
possibly even local levels for your type of business and
get licensed. Failure to be properly licensed could result
in penalties such as fines, closure of your business, and
imprisonment in some cases.
The third step is getting insurance. When things are going
smoothly, insurance can seem an unduly burdensome expense
on a small business. But when things go wrong, whether or
not you have insurance can mean whether or not you and your
business survive a catastrophic event like a lawsuit, fire,
or natural disaster.
Liability insurance protects you against liability in the
event of injury to others or damage to other persons
property. Liability insurers most often have two duties:
1. The duty to defend you. Hire a lawyer, if you get sued
2. the duty to indemnify you. Pay for damage or injury to
others. Both duties are extremely important, but the
first is often overlooked by small businesses.
The cost of defending a lawsuit can easily run into the
tens of thousands, or even hundreds of thousands of dollars
even if you win. That's why being careful is no substitute
for liability insurance.
Make sure you have adequate coverage for your vehicles and
those of your employees when used for business purposes.
You can be sued and held liable for injury or damage done
by your employees if it is within the course and scope of
Property and theft insurance may be an important
consideration, as well as product liability or service
liability insurance. This is often called "errors and
Interview a few local insurance brokers and find one that
seems knowledgeable and that you feel comfortable with.
Then ask the broker to do a risk assessment to determine
what coverages you might need and why. Remember, the
broker makes money by selling you insurance "products" so
be sure to question the types of coverage and amounts. If
your broker can't explain why he or she is recommending the
types and amounts of coverage in the risk assessment, find
The fourth step is recognizing and implimenting taxes. Sole
proprietors need to be conscious of local, state and
federal taxes and registration requirements relating to
Hiring an accountant or bookkeeper to help set up a simple
accounting system, or using a software package is a good
place to start.
Hiring a tax professional knowledgeable about local and
state taxes relating to your business, or contacting the
local tax authorities before you begin generating revenue
or expending money can help you stay organized and be ready
for tax time.
Additionally, the IRS offers assistance for entrepreneurs
starting a small business in various publications. You can
download IRS Publication 334, entitled "Tax Guide for Small
Business", and Publication 583, entitled "Taxpayers
Starting a Small Business" from the IRS web site.
The fifth step is hiring employees (if needed). Though many
small business people start out running their own shop,
success will often bring the need for expansion. When an
employee is added, you must obtain an Employer
Identification Number from the IRS. You can download Form
SS-4 from the IRS web site.
In the United States, the Workers Compensation scheme does
a lot to protect employers from lawsuits by employees
injured on the job, while also providing employees with
easier compensation for workplace injuries. Be sure to
talk to your insurance broker about workers' compensation
Talk to your tax adviser, and make sure you register with
your state for payment of unemployment compensation taxes.
Download IRS Form W-4 from the IRS web site to take care of
employee withholdings. You should get copies of INS Form
I-9 to verify your employees' eligibility for employment in
the United States.
Finally, issues regarding wrongful termination,
discrimination, workplace harassment, and other legal
issues have come to the forefront in today's business
environment. Make sure you have an employment agreement
that spells out whether your employee is "at-will". ex: can
be let go at any time without cause, or the terms of the
employee's contract for employment.
Make sure you Draft employee guidelines or an employment
manual to make sure there are no misunderstandings about
what expectations, rules and responsibilities are in place.
Document any issues relating to your employees well and be
proactive about handling disputes. A little planning in the
beginning can save a lot of headaches and legal expense
In conclusion- hiring independent contractors is often a
good way to avoid the administrative burdens of hiring
employees, but be precautious. There are many pitfalls to
hiring an independent contractor who is for all intents and
purposes an employee. Talk to a lawyer and your tax advisor
about who is an employee versus a contractor.
About the author:
Abe Cherian is the founder of Multiple Stream Media,
a company that helps online businesses find new
leads and more customers without spending a fortune.
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