Starting a business can be overwhelming, especially in New York City. The overwhelm prevents countless talented individuals from venturing out on their own. With careful planning, the benefits of self-employment far outweigh the early challenges one might face. A flexible work schedule, creative control, following your passion, and financial gains are all attractive benefits to entrepreneurs. Having a strategy in place and understanding the initial considerations is critical to early success.
Below are some of the initial key considerations when starting any business:
Chose a business name. It is important to consider whether this name is available in the state you plan to register in. In New York, you can do an initial search using the New York Department of State's database. The name you apply for may get rejected when registering if the name or something too similar is already taken - so you will want to come up with a few alternatives. Also consider the availability of domains, social media handles, trademarks, and other avenues where your business name might be used.
Decide on a business structure. Most small business elect to start as an LLC (Limited Liability Companies) or an S-Corporation. While each provides liability protection each has unique tax attributes, filing requirements, and fees. It’s also important to consider your long-term goals for the business as that could impact which entity makes the most sense.
Register your business. Your business will need to be registered with and approved by the State in which you are operating. The entity structure you chose will determine the necessary steps to filing with any State. While most businesses register in their home state, some opt for a Delaware, Wyoming, or Nevada entity due to legal efficiencies and owner privacy. It’s important to consider additional fees and filings if opting for an out-of-state entity.
Obtain a Tax ID/EIN. Once your business is registered you will be eligible to obtain a tax ID or Employer Identification Number (EIN) from the Internal Revenue Service. Applying can be done online through the IRS website or by whoever is processing your State registrations.
Draft Legal Documents. It is important for all businesses to have basic legal documentation, including Operating Agreements. Operating Agreements outline the intentions of the member(s) and are critical in the event of a business divorce should you have partners. Most banks also require these agreements to open an account, even if you are working alone.
Open a Business Bank Account. A state registration and EIN is generally all you need to open a business bank account. It is important that all business income and expenses go through a business bank account separate from personal accounts. Properly utilizing your bank account ensures all business expenses are isolated to get maximum tax deductions. Keeping your business and personal life separate also protects the “corporate veil” that surrounds the limited liability of your new entity.
Consider Business Licenses. Every business has distinct licenses and filing requirements based on the type of product or service offered, and the city and state where business takes place. Some of the most common business licenses include sales & use tax, vendor licenses, food or liquor permits, and professional licenses. Not applying for the necessary licenses could lead to significant penalties from the State for which the owner is held personally liable.
Chose an Accounting System. It is important for all businesses large and small to have adequate books and records. Accounting reports are critical to decision-making, investing, and annual filings. Early consideration of accounting systems is integral to capturing all start-up expenses and building strong financial processes.
Speak to an Insurance Agent. Most businesses have minimum insurance coverage they should maintain. Having a conversation with a trusted insurance agent will ensure you have the necessary policies in place to protect the business and its owners.
File for Trademarks & Patents. Trademarks and Patents protect your product and your brand. Considering this early on also ensures you are not violating any existing protections before you invest significant time or energy in your new business.
Hire Employees. When it comes time to hire employees ensure you have the necessary requirements in place, including a payroll system, state-mandated insurance, and benefit options required by State or Federal law. Most of these are necessary to have in place before you begin hiring.
Partnering with a small business accountant early will provide you with a resource to navigate all of these important questions and more. If you are an individual in the New York metro area starting a business and want to maximize your tax benefits, you should be sure to have proper tax guidance. At BSB Accountants and Advisors, we have helped many of our clients start their businesses on the right foot, and we've helped established businesses grow their bottom line. We serve clients in Hauppauge, Long Island, and the greater New York area. Feel free to reach out to us today and see how we might be able to help you.
