5 Things You Need to Know When Starting a Business
When you take that big step to start your own business, there can be a lot of unknowns. We want to help you understand some of the details that can help separate your personal and business assets, as well as set it up with the right legal documents, too.
While anyone can start a business, there are some specific documents or licenses that need to be established as well. It’s essential to make sure that you’ve filed the proper paperwork in the beginning stages of creating your business to ensure that guidelines are being followed. Here are the most important things you need to understand to officially start your business.
1. Register Your Business with the State
Decide on your business structure, and be sure to register your business with the state. Are you starting a nonprofit, LLC, partnership, S Corporation or have no idea what these are? The Small Business Administration has good information on their website here, you can attend an Intro to GROW class to learn a little bit more, and we are always here to answer your questions.
You’ll need to have your business name chosen. This registration will signify state recognition and approval from the state. As you grow, several people involved in the different aspects of your business will probably ask to see it like banks, vendors, service providers and perhaps even customers. Keep it handy, and also as a reminder that YOU are in business!
Even if you’re doing this as a hobby or a side-hustle separating the business “stuff” from your personal “stuff” is a must!
To register your new business through the state of Michigan, head here.
2. Get Your Own Tax ID or Employer Identification Number (EIN)
Your EIN is the tax identification number, which is a requirement for your company to do business. This is better than using your own social security number for creating your business bank accounts, and for providing it to any vendors or customers who will need your Tax ID number.
You can easily apply for an EIN through the IRS, where they will assign this number to your business and supply you with a printed copy verifying your EIN. This form and more importantly, the EIN number, will be important to show to banks or other organizations who will be involved with your business. Learn more about the process and apply for your EIN at IRS.gov
3. Permits and Licenses.
Depending on what your business entails, different permits and licenses may be required. A business license will essentially allow you to operate a business in your city and are often times required by city, county, state, and federal agencies. Permits allow you to engage in or sell certain products. For example, you would need a specific permit to sell food to the public, as well as to perform certain services that involve hair, skincare, nails and more. Keep in mind that you may also need a permit for operating a business out of your home. Again, if you’re unsure, let us know!
4. Business Insurance.
We could write a whole article on this alone, but it’s important to have a policy to protect your business, just like it is to insure your home or vehicle. Talk to your current insurance provider about options for your business. Your needs will be different if you’re working from a home-based business, leasing an office space, or running a restaurant or other service-based business.
5. It’s a Business, Not Just a Hobby.
If you’re making money through your hobby, then congratulations, you have a business! This is actually how a lot of small businesses start! As this is often the case, however, there are several smaller factors that can be overlooked, but should not be. Establishing your business with an official name, registering it with the state, and obtaining a tax ID aren’t mean to overwhelm you, but should be done to really legitimize your business. Here are a few other tips:
- Give your business its own bank account. Separate your personal and business income and expenses. This can make tax time easier, but also give you clearer records should you decide to focus more on growing your business and making it your full-time work.
- Keep records. Whether you’re using an Excel spreadsheet or a basic accounting program like QuickBooks, keep good records of income, expenses, and costs you incur. This also applies to customer records, vendors, contract employees, or employees.
- Keep it separate. Even if your business has been born from a hobby or a personal interest, as most of them are, it still deserves to be run like a business. Keeping these things separate, even if on paper, will help you set clearer boundaries for your work and records, and allow you to make more informed decisions as you grow.
- Details. Pay attention to details and take the necessary steps to ensure that your newly started business will have a great future. These things take time, but you are not alone, GROW can help
- Network. Connect with community or professional organizations where potential customers or supporters may be. This can include chambers of commerce, trade associations, professional development groups, and more! Put yourself a little outside of your comfort zone where you can meet with others and put your business out there. Check out the resource tab on our web site for a listing of community wide networking opportunities.
You Are Not Alone. We’re Here to Help!
There are many great resources available to those starting a business in the Grand Rapids area. We are one of them! GROW offers advice, information, training, access to funding and capital, business mentorship, counseling, and so much more to businesses of all sizes. In addition, we can also help connect you with other resources in our area, direct you to specific resources, and make the learning curve a little shorter for you.
Learn more about what GROW has to offer by attending one of our FREE Intro to GROW classes. They are the 1st and 3rd Thursdays of each month from 12-1pm or 6-7pm. You can view our events calendar for all upcoming events. Be sure to join our email list to get reminders delivered to your inbox. We look forward to helping you start and build your business!