Everything You Need To Know To Start A Small Business: Part 2

Hello, readers! Welcome back to the Hoods Tax & Accounting blog! If this is your first time here, welcome! We’re delighted to be able to share up-to-date information about taxes, bookkeeping, and accounting. Our blog is also dedicated to educating you about tax-advantaged savings accounts, tax provisions, programs, and more! We aim to provide you with the tools needed to meet your short and long-term goals. Our seasoned professionals are experts on the tax code, eligible deductions, and QuickBooks—all necessary fundamentals for saving you money! The Hoods Family has been around since 1988 and our comprehensive accounting and tax planning services are among the best in the Lowcountry. If you are in need of tax preparation, accounting, QuickBooks training, or business consulting services, do not hesitate to schedule an initial consultation! We are officially in tax season, and Tax Day is fast approaching. We recommend preparing early to maximize your savings and refund. We do offer contactless services using a combination of over-the-phone consultations and digital drop-offs, for safety and convenience. You can read more about our hours and submit a request for a meeting using our website!

Although tax season is over, we are still available to help with any questions or concerns you may have. Before we get into today’s topic, we would like to make you aware that we are offering tax planning appointments to assist with questions about withholding, small business tax, retirement and investment accounts, sale or purchase of rental properties, or other estates, and more! Reach out to us to set up an appointment with one of our knowledgeable tax professionals. 

In our last blog, we began our discussion about everything you need to know in order to start a small business. There are quite a few steps you need to take before you can open a small business. We discussed conducting market research, creating a business plan, and funding your business. If you are interested in learning more about these steps, we encourage you to check out our last post.

Today, we will be continuing this discussion by talking about the next steps you need to take to start a small business. Our discussion today will highlight some of the things that must be done after you have completed the steps discussed in our previous post, so we encourage you to read part one first! Starting a business of any kind is a great way to utilize your talents and creativity, make money, and be involved in your community. If you are interested in starting a small business, you’re in the right place. Let’s get started.

Choose A Business Location

Choosing a location for your business is arguably one of the most important decisions you will make on your small business journey. The location you pick will determine the taxes, zoning laws, and regulations that your business will be subject to. The first thing you will want to do is research the best location for your business. This will be determined, in part, by the location of your target audience. You will most likely want to choose a location that is most convenient for them, whether that is a brick-and-mortar store or an online store. The location you choose will also depend on the location of your business partners and your personal preferences. 

Some other factors to consider are costs, benefits, and restrictions from different government agencies. For example, when you calculate start-up costs, you should keep in mind that different expenses may cost more or less depending on your location. Costs that may vary include property values, rental rates, standard salaries, minimum wage laws, utilities, and government licenses and fees. Neighborhoods are generally zoned for either commercial or residential use. These zoning ordinances can restrict or ban businesses from operating in certain areas. Therefore, whether you are buying, renting, building, or planning to work out of a physical property for your business, make sure it meets local zoning requirements. Ultimately, the location you choose can affect your taxes, legal requirements, and revenue.

Choose A Business Structure

Choosing a business structure is another very important step in starting a small business. The business structure you choose will influence every aspect of your business, including day-to-day operations, taxes, and your personal liability. You must choose a business structure before you can register your business, and while you can change to a different business structure in the future, there may be restrictions based on your location or tax consequences. Let’s take a closer look at the different types of business structures.

• Sole proprietorship: This is the most common business structure for solo entrepreneurs, and gives you complete control over your business. This type of business structure does not produce a separate business entity, which means that your business assets and liabilities are not separate from your personal assets– You can be held personally liable for the debts and obligations of the business. In a sole proprietorship, you cannot sell stock, and banks are hesitant to lend to these types of business structures, so it can be difficult to raise money. However, this is a great choice for low-risk businesses or owners who want to test their business idea before converting it into a more formal business. 
  
• Partnership: This business structure is great for two or more people who want to own a business together. There are two common types of partnerships: Limited partnerships (LP) and limited liability partnerships (LLP). Limited partnerships have one general partner with unlimited liability, while all other partners have limited liability. Limited liability partnerships give limited liability to every owner. 
  
• Limited Liability Company (LLC): This type of business structure gives you the benefits of both corporation and partnership business structures. LLCs protect you from personal liability in most instances and your personal assets will not be at risk if your LLC faces bankruptcy or lawsuits. Members of an LLC are considered self-employed and must pay self-employment tax contributions toward Medicare and Social Security. This is a good choice for medium or high-risk businesses.
  
• Corporation: A corporation is a legal entity that is separate from its owners. This type of business structure offers the strongest protection for its owners against personal liability, but the cost to form a corporation is higher than that of other business structures. Corporations require extensive record keeping and are more common among larger companies. 
  
• Cooperative: This type of business structure is a business or organization owned by and operated for the benefit of those using its services. Some companies that fall into this category include restaurants, retail, healthcare, agriculture, and art. 
  

You can read more about the types of business structures and view a chart that compares them here. It is often helpful to consult with business counselors, attorneys, or accountants before deciding on a business structure.

Choose Name For Your Business

Once you’ve decided on a business structure, it’s time to name your business! This can be a challenging part of the process, but it is also a fun one. This is a great chance to get creative! Choosing a name for your business will determine how your business is recognizable to the public, so you want to pick a name that accurately reflects your brand identity and captures your spirit. Ultimately, your business name should also convey the goods and services you offer. You may consider taking a look at other business names in your industry to gain inspiration. Create a list of words that are closely associated with your business and the products and services you will be providing. You can even look through a thesaurus to find words with the same meaning– Something interesting might stick out! 

Once you’ve settled on a name that you like, you’ll want to make sure the name isn’t already taken. You can do this by contacting your state filing office or searching your state’s online database to verify availability. You should also check the U.S. Patent and Trademark Office, in case the name isn’t in use but is protected under a trademark. After you’ve found a name that isn’t in use, you should register and protect it. There are four different ways to register your business name:

• Entity name: This protects your business name at the state level. 
  
• Trademark: This protects your business name at the national level. 
  
• Doing business as (DBA): This is also known as a trade name. It does not provide legal protection by itself, but lets you conduct business under a different identity from your own name. 
  
• Domain name: This is best for an online presence for your business. It is also known as your website address or URL and is a great way to protect your business’s online presence. Your domain name does not need to be the same as your legal business name, trademark, or DBA.
  

Once you’ve completed these steps, you’re a little closer to successfully starting your small business! There are just a few more steps you’ll need to complete, such as registering your business, getting federal and state tax IDs, and more. If you are interested in learning more, visit our blog again for part three! We hope you found this article helpful, and if you feel ready to begin the journey of starting a small business, we encourage you to reach out to us for business consulting! Here at Hoods Tax & Accounting, our tax professionals are always eager to give our clients as much help as possible when it comes to their finances. If you have any questions regarding your taxes, or if you need help with tax planning, contact us! Hoods Tax & Accounting offers a variety of services including small business consulting, QuickBooks training, tax preparation, accounting, payroll, and more! Visit our website for more information, as well as helpful links to resources you may find useful. Thank you for reading and we hope to see you back next time to keep learning about various tax and accounting topics!