Starting a business can be overwhelming. Running a company often requires learning new skills, and for many entrepreneurs – legal contracts, bookkeeping, and financial statements are uncharted territory. Here are eight tips to consider if you plan on opening a business in 2023.
Conduct market research
It is essential to research your industry so that you can tell if there is an opportunity to turn your idea into a profitable business. Before you do anything in terms of starting your business, this information-gathering step about potential customers, economic factors, interest, and competition in the marketplace is what will put your business at a competitive advantage. Look to gather demographic information like location, market size, market saturation, pricing, and demand for your service or product.
Name your business
After conducting market research for your business – it should give you an idea of what you should and should not name your business. A business name should reflect your brand identity, and values or align with your industry. Upon naming your business, you need to take steps to protect your company and depending on what’s required by law, consider entity name, trademarking, or doing business as (DBA), which does not give any legal protection but can be used if you are wanting a public-facing name that might differ from your legal entity name.
Make it legal
Now that you’ve decided on a name, you will need to take action to protect your company and make it legal by registering your business. It is critical to take note of your state’s laws in this area to ensure your business name or legal entity name is operating under the correct registering rules and regulations for tax purposes. The location of your business and the type of business structure you choose will determine how you need to register with your state and/or the federal government. For Washington state, you need to review the Department of Revenue’s website for how to properly apply for a business license with the Washington Secretary of State before filing your application. There are variable business license fees, and these fees are non-refundable under Washington law, so it’s wise to consult a CPA or financial advisor before completing your business registration.
Choose a business structure
The business structure you choose will influence operations and how much you will pay in taxes, so it is critical to consider all the available options. Sole Proprietor, Limited Liability Company (LLC), Partnership, S-Corporation, and C-Corporation are the most common types. Before you can register your business with the state you will operate in, you will have to designate a business structure. In most cases, you will need to get a tax ID number and file all the appropriate licenses and permits. The choice of business structure is not an irreversible decision. You may amend your business structure to accommodate your changing needs and circumstances.
Secure your federal and state tax ID numbers
For your business to grow and work with other business partners like bankers to secure a business checking account or pay taxes to the federal government, you will need an employer identification number (EIN). Think of your EIN number as your business’ Social Security number. You will also need to file for a tax ID number in the state of Washington that will be used for tax tracking if you are planning on selling taxable goods and services in the state or if you are going to owe excise taxes on goods like alcohol or gasoline. You can visit the Internal Revenue Service (IRS) website to fill out an application for your EIN.
Form a business plan
Think of a business plan as the foundation for your company that is going to guide you every step of the way. A business plan or in other words a financial plan for your business is handy for forecasting, budgeting and presenting your idea to potential investors in the event you want to sell in the future. A solid business plan cannot sit in your head, it needs to be written down with detailed, comprehensive information that’s critical to you and your staff’s day-to-day operations. This is where your CPA and financial advisor can come into play – helping you form this plan and build out financial statements, financial projections, market analysis, and more.
Open a business bank account
When opening a business, it is key to keep your business expenses separate from all personal expenses. By opening a business account with a bank, you ensure your legal, tax, and all day-to-day expenses are kept in independent accounts. A business account can be a checking account, savings account, or credit card accounts if your business will be working with vendors that accept credit or debit card transactions.
Use technology to your advantage
In 2023, there are numerous benefits to being set up with certain technology or software programs that help your business run in the most efficient manner possible. As a small business owner, you might not have the funding or established brand reputation that larger companies have or the staff to help divide up responsibilities. For product-based businesses, research inventory management software that can help track inflows and outflows and inventory for retail-type businesses. If your business requires numerous contracts and agreements to be signed – look to research e-signature tools for more efficient and automatic signings. For customer-focused business generating leads, look to customer relationships management (CRM) platforms that can help keep track of your business relationships, potential leads, and existing customers.
Seek help from experts
Most small businesses don’t start out with an in-house accountant or CFO. So, the job might fall to you or the team member who first learns about your financial system. Unfortunately, many people know just enough to be dangerous when it comes to accounting, and mistakes can end up costing money down the road. Not to mention, without proper training, you are sure to miss advantages and opportunities to be more profitable! Seek help from professional referrals from people you trust, conduct your research, and interview potential accounting partners.
Charlie Miracle is a certified public accountant, principal and director of client accounting services at Cordell, Neher & Company PLLC in Wenatchee. He can be reached at (509) 663-1661 or email@example.com.