How to Start a Business - 8 Steps by a Lawyer in 2019
Step 1: Pick a name
Go to the Michigan Department of Licensing and Regulatory Affairs (LARA) and use the Business Entity Search webpage to check for available names.
Then, secure your Domain. Even if you aren’t planning on creating a website right away, I highly recommend that you secure the URL now to prevent others from acquiring it.
Eventually, you will need to create a website!
Step 2: Hire an Attorney
Your business is going to be your livelihood- hire an attorney to make sure you’re protected, that you’re doing everything properly and that you mitigate any future risks.
If I had a dime for every time someone walked into my office asking me to fix their mistakes in business, I’d be retired. It’s WAY more costly to fix a mistake than it is to do It right the first time.
It always amazes me that people will pay thousands of dollars in auto insurance to protect a $20k $30k $40k car, but won’t hire an attorney to protect their livelihood.
Step 3: Form your Business
The most common legal structures for a small business are:
- sole proprietorship
- limited liability company (LLC), and
This is where an attorney comes in handy. So many people walk into my office asking to form an LLC, but haven’t the slightest idea why they want to form an LLC.
No organizational structure is ideal for every business situation. When organizing a new business, you should compare the corporation, the LLC, and the partnership to determine what is best for you.
The top considerations in determining what is best for you are (1) protection from personal liability; and (2) tax consequences.
If you choose not to register your company as a business entity, you will be held personally responsible for the debts and liabilities of your business.
Step 4: Register for Taxes
Most business require a Federal EIN, also known as a Tax ID Number. Think of it as a business’ social security number.
Not all business require an EIN, but you should get one even if it’s not required.Without an EIN, you can't hire employees, open a business bank account, obtain a business credit card and limit potential liability.
You should also be aware of important Michigan taxes that may apply to your business:
- If you are selling a physical product, you’ll probably need to register for Michigan Sales and Use Tax, but there are exceptions, so speak to a Hermiz Law attorney.
- If you hire employees, you will have to register for Unemployment Insurance Tax, and Employee Withholding Tax on behalf of your employees.
- Register your business with the Michigan Department of Treasury so that you can make your tax payments.
Step 5: Create Business Banking and Credit Accounts
Using dedicated business banking and credit accounts is incredibly important in starting a new business, which I’ll be discussing in a separate video.
To start a business banking account and credit card, you’ll need that Federal EIN, because that’s the social security number.
Depending on the type of account you’re opening, you may need to take some other documentation with you. For example, as an attorney, I need to have an IOLTA account (client funds account). I needed to take documentation proving that I was in fact an attorney to have this type of account.
Pro-tip- if you ever walk into a bank, and ask to open an IOLTA account or other specialized account, and they don’t know what you’re talking about- RUN.
Personally, I like banking with big, reputable banks, where there’s a branch on every corner, an easy-to-use website, and great app. I personally love Chase, but definitely do your research to figure out which bank offers the best perks for you.
When opening a business credit card, look for the card that has the best perks- miles, cash back, low interest rate, good protection policy, foreign transaction fees, etc.
You’ll also need to set up your accounting. An accounting system helps you track the performance of your business and simplifies tax filings. Quality software will download your bank and credit card transactions directly onto the software, which will make accounting a walk in the park!
I personally use Quickbooks and I’ve worked alongside many accountants throughout the years, and they’ve all said that nothing works as well as Quickbooks.
You’ll also need a good CPA! Call a Hermiz Law attorney to get a good recommendation!
Step 7: Obtain Permits and Licenses
To operate your new business legally, you will need to comply with federal, state, and local government regulations. In many cases, this involves obtaining one or more business permits and/or licenses.
Every business will require different permits and licenses, so you’ll want to speak with a Hermiz Law attorney about which one you’ll need.
Failure to obtain the proper licenses and permits can result in severe penalties, including fines, criminal sanctions and forced shut down.
Step 8: Get Insured
Business insurance helps you manage risks so that you can focus on growing your business.
The most common types of business insurance you should consider are General Liability Insurance, Worker’s Compensation Insurance and Professional Liability Insurance.
Hermiz Law recommend that all small businesses, including home-based businesses, purchase a general liability policy.
Businesses selling professional advice or services, such as consulting and accounting firms, should also consider a professional liability policy.
In Michigan, businesses with employees are required by law to have workers compensation insurance. Call a Hermiz Law attorney to make sure you are compliant.
Step 9: Establish a Web Presence
In today’s digital world, your website is your store front! It’s incredibly important to get a good website and promote your business online, You’ll need to set up social media profiles (Facebook, Twitter, Instagram, etc)., create accounts on review sites (Yelp) and createa. local Google profile.
You’re now well on your way to starting out your new business!
For further assistance, please call a Hermiz Law attorney at 248-825-8042 to schedule a consultation.
Posted on June 27, 2019 by in Business Law