So You Decide To Take The Leap To Become An Entrepreneur!
Dear Friends & Neighbors,
(Please click on red links & note magenta)
Once you’ve decided that entrepreneurship is the route for you and you are ready to take the leap,
now let’s move onto the mechanics of starting your business.
I. Define the product or service of your business
- What is/are the unique features of the business
- What would be the customer profile & how would these customers benefit from the business
- How will the product/service be sold
- Who and how will the product or service be made or provided
- What would be the mode of distribution
II. What kind of legal entity will be your business
- Sole Proprietorship (Pros: complete control & flexibility to run the business as you/owner sees fit;unlimited liability means creditors are more likely to extend credit if needed;all business profits to you/owner;less fees and less paperwork. Cons:personally liable;bank loans hard to come by;business relies on one person only.)
- Partnership, General, Limited or Limited Liability (Pros: taxation for all partners;less expensive and less paperwork than corporation;partners can pool resources and share the financial obligation;no rigid, obligatory corporate structure. Cons:shared responsibility for debt and loss;personal liability;liable for debts and actions of your partner;limited capacity to raise money and attract investor.)
- C Corporations (Pros: limited liability;ability to sell stock;well established structure;employee stock purchase. Cons: time consuming, expensive, lots of paperwork;highly regulated, little flexibility;possibility of double taxation.)
- S Corporation (Pros: protected assets/limited liability;pass-through taxation (no double taxes/individual tax rate);easy to transfer ownership;credibility. Cons: formation can be tricky and may need help;stock restrictions (100 or fewer stockholders);tax obligations:tricky. mistakes can mean loss of S corporation status with IRS;less flexible allocating income and losses)
- Limited Liability Company (Pros: flexible taxation:have the option of being taxed as a sole proprietor, partnership, S corporation or C corporation;easy and cheap:less paperwork and lower filing costs;single tax:flow-through income taxation;limited liability: members are protected from some (or sometimes all) liability if the company runs into legal issues or debts. Cons: No wages;if you’re an owner of an LLC, you cannot pay yourself salary/wages; annual renewal; harder to raise capital;unless running the LLC alone, ownership is spread across its members (this may also be a pro).
III. New Business Start-Up Procedures
- Check if the desired business name is available in state of Florida via sunbiz.org , if trademark is available in U.S. via U.S. Department of Commerce at USPTO, if tradename (DBA, Doing Business As, in U.S. and Canada) is available.
The distinction between a registered legal name and a “fictitious” business name or trade name is important, as businesses with the latter give no obvious indication of the true identity of the entity that is legally responsible for their operation. Fictitious business names do not create legal entities in and of themselves; they are merely names assumed by existing persons or entities. Legal agreements such as contracts are normally made under the registered legal name of the business or owner, and the legal name must be used whenever a business sues or is being sued. (Source: wikipedia, https://en.wikipedia.org/wiki/Trade_name )
2. File a fictitious name registration or apply for business entity with state of Florida (using available name) at sunbiz.org . (Be sure to double check if your fictitious name is registered and can be searched or found at sunbiz.org after all application form and fees are paid.)
4. Where applicable, be sure to check if special license is required for your particular business at the federal level (such as Agri; ATF;Fish/wildlife;Import-Export;Telecom;Transp)
5. Obtain a Federal Tax I.D. Number (FEIN) via IRS.org or use social security number if sole proprietorship.
8. Check & Complete a Business Receipts Tax License (aka as Occupational License) with your County Government web site. For example, if your business is located in or if you’re doing business in Orange County, you will need to personally go to Orange County Government at 201 South Rosalind Ave., Orlando, FL
to apply for the Business Receipts Tax License and all necessary county permits for the first time. Subsequent renewal each year (on Sept. 30) may be completed online. Currently it is required for the first time applicant to appear in person to apply for Business Receipts Tax License, but let’s hope that this may be done via online in the future. After you have submitted your application and fees, be sure to double check that your business name will show up upon “business tax search” at the site, octaxcol.com (if your business is in Orange County) for there may be other businesses & potential clients checking to confirm if your business is a legitimate entity. For businesses outside of Orange County, you may confirm (after the application and submission process of your Business Receipts Tax License or Occupational License) by googling your particular county’s tax collector web site and do a “business tax search” for your business name. If your business name does not show, be sure to check with your county government to correct the error. It is important that all of the applicable state, county, city, and permits application and fees are taken care of in order to protect your business.
9. For city tax, you will have to check with your respective city government for the requirement. For those of you living in or running business in/doing business in the unincorporated area, you will not need to worry about city tax.
11. Now you are ready to open business bank account and obtain insurance. It is recommended that you would separate your business bank account from your personal bank account.
Stay tuned in for Marketing-Insurance-Finance in the next episode of How To Start Your Own Business….
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