While statistics vary, as many as 50 percent of new small businesses will not survive five years. This does not seem to deter many entrepreneurs; and to many starting a business is the ultimate American dream. Most potential entrepreneurs have an idea for a business but no clue what to do to make that idea into a business. Here are some legal and tax tips to consider.
1.Have a Business Plan
A business plan is not a legal requirement; nor is it mandatory to start a business. However, it is a very good idea to have one. Writing a business plan will force you think about the business from a financial and logistical prospective. Where will it be located? Who will the customers be? How will those customers know about the business? Where will the financing come from? What are the projected earnings? These are just some of the questions a business plan should address. It is also good to think about more long term goals as well.
2.Create a Formal Business Structure
A formal business structure, such as a corporation or limited liability company lets clients know that they are dealing with a business. It is also a good way to protect personal assets, maintain your privacy, protect the business name and even attract investors.
3.Determine Whether a License or Permit is Needed
New York requires numerous businesses to have a permit or license to operate. Many can be applied for online through OPAL.
4.Obtain a Federal Employer Identification Number
An EIN is a businesses social security number. You will need this number to pay taxes, open a bank account, and apply for a business license. The application is available online.
5.Register for a New York Certificate of Authority to Collect Sales Tax
Sales tax must be collected by a business that sells most tangible personal property and provides some services. Register as a sales tax vendor to collect this tax. Products, services, and transactions subject to sales tax. If a business makes taxable sales prior to having its Certificate of Authority it may be subject to penalties. The New York City Finance Department recommends that a business obtain its certificate at least 20 days before it starts selling.
6.Obtain Workers Compensation and Employee Disability Insurance
New York State requires employers to provide worker’s compensation and employee disability insurance to all employees. Employers can obtain coverage through a private insurance carrier, the NYS Insurance Fund, or be self-insured. For more information, including limited exclusions, visit the New York Worker’s Compensation Board.
A business can not make money if it does not sell a product or service. Now that all the legal stuff has been handled, begin selling.
8. Pay Taxes
A business must pay various state and federal taxes throughout the year.
9.Do Not be Afraid to Get Help
There are many free and low cost resources available to small business owners. Use them. The New York State Small Business Development Center offers free business consultations in person and online. New York City offers free onsite employee training aimed at streamlining operations and reducing waste. For more information contact the Department of Small Business Services. The New York Public Library maintains a calendar of events from various organizations that help small businesses.