here are many things that need to be accomplished in order to start a business correctly. It can be very confusing if you have never done it before, and some items can easily be forgotten. Often, these items resurface in the future and cause trouble for you. Please note: this article is not professional legal or accounting advice. I, therefore, highly recommend that you consult with an attorney and an accountant to ensure you are following all of the requirements for your state, county, and city. Below is a summary of the mandatory items that must be accomplished, plus a secondary list of suggested items to complete.
First Things First
Choose a name for your business
Before selecting and finalizing your business name, it is HIGHLY recommended that you spend some time on Facebook and Google searching for that particular business name to see if it already exists. If it exists in another state, you can still use it, although I would recommend that you do not. However, if the business name is already being used in the state that you are operating in, then you should choose another name.
Choose and purchase a domain name for your business
- You might be surprised that this is listed so early in the process. Here is the reason: I always suggest that finding your future website domain should be part of choosing a business name. It ensures that you have an easy-to-remember domain name and that no one else takes it. If you do not have marketing knowledge, here is an excellent article to read before choosing your domain: https://websitesetup.org/choose-domain-name/
- Although there are several domain name-purchasing services you can use, I always use www.godaddy.com. I do not purchase any of the extra add-ons they offer and have never had a problem. It will cost you about $15 per year. I suggest you set it up on auto-renewal.
Appoint a registered agent for the business
- You will need to do this before you go online to register your business. This is the person who will receive any correspondence regarding the entity and who can officially submit documentation to the Secretary of State to update the business records. It is also their name that will be listed in government records as associated with the business entity. It does NOT affect tax status or who is responsible for claiming the business income on their taxes. Think of it as the point of contact for the business. If there is any reason that you would not want your name to readily show up with this business, finding someone else (e.g., your attorney) to use as the registered agent helps ensure this does not happen. For most people, this will not be a big deal, and you can list yourself.
Choose a proper business entity
- There are many business entity types that you can use when forming your business. For tax purposes they are all treated differently and offer the owner, you, different levels of protection. In order to have the government honor those levels of protection, called the corporate veil, there are different requirements of the business based on the business entity type chosen.
- Many people push forward with a Limited Liability Corporation structure without ever consulting an accountant. This may be alright if you are pinching pennies. But, if you do, then set a reminder for yourself to consult with your accountant within about nine months. There are certain ways to change how your entity is taxed that terminate after one year of formation. You will certainly want an accountant’s advice before you lose that ability. Ultimately, the best thing to do is to consult with an accountant before setting up the entity.
Register your business with the state that you are operating in and receive your Articles of Organization. (This step actually forms your new business.)
- In the state of Tennessee, when you have completed registering your business through the website, you are provided with the Articles of Organization for your business. Admittedly, I am not positive that every state creates Articles of Organization and delivers them to you through the registration process of your entity.
- If you are required to provide your own Articles of Organization during the process, then you will want to consult with an attorney and have the attorney draw up Articles of Organization for your company prior to starting the online registration process.
- Regardless, you should be able to find where to register your business with your state’s Secretary of State website by searching Google with: “How to register a new business in [STATE]”. You should find a helpful link to the appropriate place to register your business.
Register your business with the federal government and receive your Employer Identification Number (EIN)
- Obtaining an EIN is like getting a social security number for your business. It is how the federal government will keep track of the business and identify it. The website to complete this task is: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online Simply go to that website and fill everything out. The website leads you through the process easily, so you should not have too many questions.
Register with the county that your business is located within to secure your Resellers’ Sales and Use Tax Permit
- This permit is what allows you to collect and remit sales tax on your sales to the local government. Many people try to conduct business without getting one of these permits. You can probably operate for a short term while you are small and getting started, but you will not be able to grow to much size without it. Also, you are running a risk by doing so. If you get audited, the government can hold you liable for all unpaid sales tax in the past. This can add up to a significant amount over a year.
- If you plan on selling out of state, for every state in which you exceed the economic threshold, you are required to file and pay sales tax to those states as well. Be sure to seek proper professional advice to ensure you are not in violation.
- Also, understand that just because you may have paid sales tax when you purchased the product from your supplier, if you resell the item, you are required to collect sales tax and remit it to the local county government. You are not relieved of the sales tax obligation.
- Lastly, without one of these permits, many of the larger, more legitimate sellers will not sell to you. For example, my company, BuyLow Warehouse, only sells to resellers that have a Resellers Sales & Use Tax Certificate. This ensures we are never found to owe thousands of dollars in unpaid sales and use taxes and ensures we do not have to report sales tax for each state and county that we sell into.
- For a more in-depth look at Reselling permits, check out our other articles:
- Article 1: What is a Reseller License?
- Article 2: Risks of Purchasing Without a License?
Check with your state’s Department of Revenue to see if you need to register for anything else
- Most likely, you will have a couple of other things to register for. For example, in Tennessee, I also have to register for “Business Tax” and “Franchise and Excise Tax.”
- Simply perform a Google search for “How to set up a business in [STATE].” You should find a website that explains this to you.
Are You Looking for Truckloads?
If you are interested in purchasing your first truckload or seeking a new supplier, I invite you to sign up for my daily available truckloads email list.
Building Relationships This business can be very profitable, but it does not come without risks.
As with any start-up business, it takes experience, testing, and adaptation to create success. I hope I have helped prepare you for the beginning stages of your upcoming business venture, and perhaps interested you in developing a relationship with me. If you have additional questions, comments, or just want to chat about the industry, please do not hesitate to reach out to me through our contact page. I am here to help you!