Hello, my name is Fred Glave and I am a volunteer counselor with SCORE, Counselors to America's small business. This series of videos is taking you through a step by step process of setting up a small business. This particular video here is going to go through some of the initial steps that you must undertake to actually get your business setup and running. Host: What are the first steps to take in starting a business?
Well, at the risk of repeating myself, the very first thing you do is write your business plan as we talked before. In fact, I would recommend that do not do anything. Don't commit to leasing space, don't spend money, don't make commitments that are going to tie you or bind you in any way until you have that business plan written and preferably you have had some professional review and help for it as we mentioned previously. Too many people come in to see us for counseling and I find that for example, they want to start a restaurant and they already have picked out the ideal location and are ready to sign the lease. They haven't incorporated their business, they don't have a business plan, they don't know how they are going to fund their business. So don't do any of those things. So that's what not to do when you start a business. The first thing after you have had your business plan written and had it reviewed, you are satisfied, is you can now go ahead and start the basic mechanical processes. The first one is the form of organization that you want to use for your business and basically, they are for a sole proprietorship, a partnership, a full corporation and a limited liability corporation. We don't have time here to go into all of the details and differences between those forms of incorporation, but again I can recommend you go to our website, click on Learning Center and then click on the Virtual Learning tab. You will be asked to register but then you will be given a list of online courses that you can go through and one of them concentrates on the various forms of incorporation. You should always use an attorney when you are setting up and incorporating your business, except a course for sole proprietorship because that requires no legal action on your part.
The reason for doing that is even for example, with an LOC you can go online and you can fill out all the paper work and file it with the state. But the LOC lines are always changing. They vary from state to state and it is always best to have an attorney check over your LOC application before you file it with a state just in case there is something that you have missed. I always recommend too when a small business is seeking out professional help that they use an attorney or even an insurance firm or an accountant who specializes in dealing with small businesses. Their needs are different than larger organizations, their needs are different than the individuals. So try to find an attorney who is familiar in dealing with the legal affairs of the small business. Once you have set off the type of corporation that you want to use, the next thing you do is register your business. Now you do this with the local community that you are in and/or with the state depending upon the nature of your business and again, you can go to the state websites and their local county websites in order to find the appropriate entity and for most often, this maybe done right online. After you have registered your business, the next step is to get a business license. Now sometimes, those are the one and the same thing, but typically, a business license is something that is required at the county level and is a very straightforward process with a nominal fee. Once you have your business license, there is another very important aspect of your business that must be taken care of and that is to get a tax ID number.
Now if you are a sole proprietorship, you don't need a tax ID number because you use your personal social security number because all of your income tax and all of your business related revenue and expenses is incorporated into your personal tax return. However, if you have a partnership or a full corporation or an LOC, you need a separate federal tax ID number as well as a state tax ID number. Again, you may go to the website to determine where to get that or in the case of the Federal Government, you can simply call 800-8291040 or 800-8293676 and you will be given to the right person who can give you the information and the process to go through.
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