How to Start a Business While Avoiding Nasty Surprises
There are two extremes to starting a business: carefully considering your situation and best steps forward, or throwing caution to the wind and jumping in with both feet.
Most businesses start with a combination of both philosophies—it’s important to avoid paralysis by analysis, forever accumulating information and failing to take action, but it’s also important to use common sense and have a basic understanding of your responsibilities and requirements. In this post, we’ll look at how to start a business while avoiding costly pitfalls or embarrassments.
Your Business Name
If you’ve wanted to start a business for awhile now, you may have had your business name selected for years—but it’s important that you do a little bit of research before running with the business name of your dreams so that you don’t have any nasty surprises cropping up in the future.
When you register your business name with your state or local government, it’s likely they’ll do a name search for availability before placing your business on file. However, it’s important to note that state acceptance of your chosen business name is not to be taken as broad permission to use it, nor does it imply that you have exclusive rights to the name.
Your Secretary of State will search state records to make sure there’s no other business entity of the same type on file with the same name; other business filings, such as county DBA registrations, may or may not be subject to a similar search. But this search is done only to ensure compliance with that state’s name availability guidelines; it does not, for example, check records of neighboring states for business name similarities.
Instead, it’s your responsibility to check trademark registrations, both with the US Patent and Trademark Office and other state and local agencies. Additionally, look into the various public databases that collect and archive information on unregistered trademarks, as registration is not necessary for all trademark benefits.
Signs and Logos
Consider a spa and wellness center called Aloha Dreams Hawaiian Destinations. It sounds like a beautiful place to relax—until you drive up and see a big sign that says “ADHD” out front.
Or what about Peter, who didn’t realize his Military Surplus shop sign would cause 13-year-old boys to snigger about the female reproductive system.
It’s important to look at your business name at all angles. If any iteration of it has the potential to shock or induce giggles, it might be worth reconsidering.
Your Industry Competitors
You wouldn’t enter a fight without checking out the competition, would you? The NFL greats watch video of upcoming opponents to scope out any weaknesses and use them to their best advantage. If you want to attract customers, you need to know what their experience is with your competitors so you know how to make their experience with you a better one.
Try surreptitiously placing an order with one of the giants in your field. If it’s a service, take careful note of their language, how they’re treating you, and what areas you, as a customer, might wish to be improved on. If it’s a product, note the packaging, the presentation, and the product itself.
Now, think of ways that you could not only measure up, but take the lead. If they include a printed thank-you note, you might make yours handwritten. If they use a great deal of packaging, you might make it a point to use less, and advertise your company’s commitment to reducing your carbon footprint.
Always look for ways to make your business stand out from the crowd. (And remember: if you don’t have any competitors, it’s possible you maybe have taken a wrong turn. All industries have competitors.)
Your Ongoing Compliance Requirements
Simply registering your business name isn’t enough. You’ll need to comply with the requirements of local, state, and federal offices and agencies, and many of those requirements—and the relevant agencies themselves—depend on your business structure and industry.
Many states require DBAs, or unincorporated Doing Business As businesses (such as sole proprietorships), to publish notice of their filing in a newspaper of general circulation in the business’s county; examples include California and Pennsylvania. Many other states require new corporations and LLCs to do the same.
Check your filing jurisdiction’s website (typically your Secretary of State or County Clerk) for specific requirements, and make sure you understand all of the details. (Is it enough to simply publish notice, or do you have to file proof of publication with your state government?)
IRS Requirements: EIN
Any time you earn money throughout the year, you’ll need to report your income to the IRS. Not all business structures require an EIN—sole proprietorships, for example, may use the sole proprietor’s Social Security Number, if they wish—but whatever the case, if you’re making money, the IRS wants to know.
You’ll also need to register your business with your state tax office, especially if you have employees, since you’ll also need to pay state taxes. To do this, you’ll receive a State Tax ID number, typically from your state’s Department of Revenue, Tax Assessor, or other office. Contact your Secretary of State—they’ll be able to point you in the right direction!
Business Licenses and Permits
Depending on your activities, you may be required to obtain business licenses or permits from any number of city, county, or state government agencies. For example, you may need a city sales permit, in addition to any regulatory licenses for those sales (gun permit, liquor license, and so on).
This is not to be taken as a comprehensive list of all of your business responsibilities. Rather, it should get you started thinking about what types of government agencies and offices you might need to contact to determine any potential next steps forward after starting your business.
Remember, a corporate lawyer or legal advisor can help you make these determinations and keep you in compliance so you don’t have potentially hefty fines and late fees crop up.
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