Starting a business is a big decision and one that isn’t taken lightly.  It’s both exciting and scary and that is the best part! You are embarking on a new adventure so there are endless possibilities and of course risks that go along with it. 

One of the first things you want to do is consider what type of business you want to have.  Does it make sense to have a sole proprietor, LLC, or corporation? What is best for you and your business?

We can’t give you the answer to that but we can give you some advice on helping you make that decision. 

First, do your research.  Look up business registration options in your state.  You should find some helpful sites that define and lay out for you all the benefits/reasons for each option.  Then you can decide what is best for your particular situation. 

Once you have decided on the type of business, you need to go about getting it registered. You can do this online on your own through your state, but we don’t recommend going that route. There are many options online for legal sites that will help you get all this in place so you don’t miss anything. You can also reach out to a local lawyer if you have one. There is a lot of paperwork required when you register a business and you want to be sure that you are covering all the mandatory requirements for your state and area.

You need to decide on a business name also as you will need that in order to register.  Pick at least 2 options. Usually the registration paperwork will request a secondary name in case your first option isn’t available. 

Once you have received your paperwork back from the state saying your business is officially registered, you will want to get your EIN (Employer identification number) request in (if this wasn’t included in a package you did through an online registration company). You will want this whether you have employees or not. Even as a sole proprietor you can use this instead of your social security number when you are providing business information to your clients or looking into getting loans, setting up a bank account, or anything like that. 

Another important thing to consider is whether the team working with you (if that applies to you) are employees or 1099 (sub contractors). You don’t want to get in trouble with this.  A sub contractor is someone that works with you but has their own business and other clients. You are not reliant on them to run your business.  The template we will include in a later lesson will have the updated legal wording for your agreement that shows you are not an employee of your clients (and you should make sure that is in place with any agreement you have with subcontractors as well). 

An employee works for you and has designated times to work. You rely on them to do the work in your business and keep things running. 

If someone is working with you solely, or for a lot of hours a week, or you rely on them in order to run your business, they are likely considered an employee not a sub contractor.  If you are classifying them incorrectly you are at risk of fines and other punishments for doing this.  Be aware of this and be careful in your classification.  

It is also helpful to consult a fractional HR person to help make sure you are compliant.  We have people we can suggest to you if you are looking for recommendations.  An HR expert can save you thousands of dollars in the long run if you make sure things are correct from the start and yearly in your business. They know all the updates that the rest of us usually aren’t aware of so they can keep us out of trouble for doing something we didn’t know better about. 

Action Steps For This Lesson

Erin Alli

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