QUESTION: I am thinking about starting a business. However, I am not sure what steps I should take. Can you offer some direction in this regard?
ANSWER: Your question is timely, as several state and local websites have been recently updated. The first thing you should do is construct a written business plan.
I see too many entrepreneurs who invest a lot of money with start-up expenses, before doing the necessary due diligence.
A well-constructed business plan will address all of the necessary steps you must take in the formation of a new business including:
- Select a legal structure: Consider an S corporation or a limited liability company if yours is a sole proprietorship or one with just a few partners.
Visit https://bos.sbsd.virginia.gov/ for information on this and many other items of interest.
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- Register a fictitious name: A fictitious name is the legal term for an assumed name that a business uses instead of the name of the owner. This is also known as a DBA or “doing business as.”
This allows individuals or businesses to use trade names without having to create a separate legal entity.
- State and local licensing: Depending on the type of business you are operating, it may require either or both types of licensing. See https://tinyurl.com/y834aoyl
- Apply for a Federal Employer Identification number: This number is required unless you are operating as a sole proprietor. Visit www.irs.gov
- Register to pay federal, state & local taxes: These may include a federal employment tax at www.irs.gov and Virginia sales and use taxes. See https://www.tax.virginia.gov/sales-and-use-tax
In addition to the above, you may have to buy or lease building and equipment. Also, decide what type of insurance you will need to cover your property, legal liability and employees, if any.
Most small business fail in the first two years because they have underestimated start-up costs and ongoing monthly expenses before they reach the break-even point.
The SCORE website offers a free business plan outline that includes financial templates for determining start-up expenses and a 12-month cash flow projection. These forms can be found at https://tinyurl.com/zfzvje8
You will need to engage the services of an attorney, accountant and commercial insurance agent to help you grasp the complexities of owning a small business.
The counselors at the Richmond chapter of SCORE stand ready to assist in developing your plan.
Gray Poehler is a volunteer with the Richmond Chapter of SCORE, Counselors to America’s Small Business. To ask a question or request free and confidential business counseling, go to Richmond.score.org/mentors. Learn more about SCORE’s workshops on the website or by calling (804) 350-3569.