In our continuing series (see below for past links), this blog focuses on the mechanics of starting a new business.
You have decided on the entity’s structure and have prepared a comprehensive plan. You have identified a unique and simple business name that easily can be remembered and accessed by the internet. You have obtained a domain name (see Part III) for both the both .com and .net versions.
The next step is to file and record your organizational documents with the Arizona Corporation Commission and prepare an Operating Agreement if an LLC or Bylaws for a corporation. Templates for all these documents can be obtained online.
You must obtain an Employer Identification Number (EIN) from the Internal Revenue Service, which can be obtained online from the IRS. With your organizational documents and the EIN number, you can open a bank account and establish banking relations with your lending institution.
If you are in the type of business where an occupational license is required, one must be obtained from the State or County. You may need to obtain a transactional privilege tax form from the city and a transactional privilege tax application from the Arizona Department of Revenue.
Start with some initial capital in your checking account and promptly order checks with your business name and address on them. Most businesses will not accept temporary checks that do not have a pre-printed name or address on them.
Your business has now been given birth, and you have to let the rest of the world know you are there. Prepare a functional webpage through a web page designer. Select specific key words and strive to get to the first page on Google for your business. You may need to engage a search engine optimization provider to achieve this.
Contact your insurance agent or broker to obtain quotes for appropriate insurance to meet your business needs. The following insurance coverage should be considered:
. general liability insurance
. product liability insurance
. worker’s compensation insurance for employees
. officers and directors liability insurance if you seek to add other individuals to your organization at the management level.
You will have to hire employees, either on a part-time or full-time basis. Always do a reference and background check. In addition to considering relevant business experience, please consider the fit into the company’s culture. In most instances, you should have a prospective employee or agent sign a confidentiality and non-compete agreement regarding confidential information and trade secrets of your business. Be sure to have an ownership redemption and buy-back agreement for those employees to whom you have given an ownership interest in the event an individual terminates his relationship with the company.
Financial and business controls are key to a successful business (see Part VI). Necessary records to be kept in a new business will include transactional documents, financial statements (P&L, balance sheet, cash flow), employee records and payroll records. For a corporation, create a Minute Book that include minutes, consents and stock ledger. You will also need records for local, state and federal income tax purposes.
An attorney or a certified public accountant can help you determine the essential business records. Do not let your business transactions outrun your business controls. I have seen some excellent business models lose their way when they fail to keep track of business transactions, inventory, income and expenses.
Your online presence is key to your success. You may wish to engage a marketing company to promote your business or service and to place ads on your website. Be careful of exclusivity agreements with marketing companies and scrutinize compensation arrangements. Be careful so you don’t become cash starved.
Periodically, step back to review and revise your business plan, consult with your attorney and CPA regarding the nature and course of your business. As you progress in business, you will see niche opportunities; be sure to take advantage of them. Starting a business is difficult, but there are many success stories. With luck, timing and hard work, you can be one of those successful businesses.
In the next blog, we will review the necessary steps to start a new business.
Lat J. Celmins
Disclaimer: This blog is for information purposes only. Legal advice is provided only through a formal, written attorney/client agreement.
Links to previous blog and original article: