Have you ever thought of starting your own business? Are you wondering how to begin? Simply follow these six steps, and you will be on your way!
1.) Decide on a name for your business
Decide what you want to call your business. It’s often best to select a broad business name to provide room for movement within your craft. For example, a name such as “Pinewood Picture Frames” would limit you to picture frames made of pine. However, the title, “Woodwork by Allen,” would allow you to diversify your business into many woodworking projects.
Once you have selected your business name, visit your state’s Secretary of State webpage to see if your business name is available. If you plan to create a website, you should also see if your domain name, or something similar, is available before proceeding.
In Colorado, you may search for business name availability on the Colorado Secretary of State website.
2.) File your business with the Secretary of State
Go to your state’s Secretary of State webpage and file for a Sole Proprietorship. In most states, this simply requires completion of a short form and payment of a small fee. Unless you are certain that you are ready to be a LLC (Limited Liability Corporation) or Inc. (Incorporated Company), it is usually best to begin as a Sole Proprietor.
Sole Proprietorship allows you free access to all income through your business and keeps tax filing easy. If you need more protection from liability, you may need to create a LLC or Inc. In this case, speak with your lawyer or accountant before proceeding.
In Colorado, filing for Sole Proprietorship can be found on the Colorado Secretary of State website.
3.) Apply for an EIN (Employer Identification Number)
Go to the IRS website to begin this simple online process. You will need an EIN to open a business bank account.
EIN applications through the IRS can be found on the IRS website.
4.) Research your local sales tax laws
Learn about your local sales tax laws and how they apply to your business. Sales tax is generally paid on all local sales and is due quarterly or annually. Every city and state has its own laws, so take time to learn about your local requirements before proceeding.
Find the answers to the following questions:
What are your local sales tax rates?
Where will you send sales tax payments?
When is sales tax due?
Do you need a sales tax license?
If you are planning to sell items online, will you be required to pay sales tax?
5.) Apply for a wholesale or sales tax license
Research wholesale or sales tax licenses and how they pertain to your business. Most states require a license for you to purchase items at wholesale and sell them to customers.
In Colorado this can be obtained through the Colorado Department of Revenue. Visit the Colorado Department of Revenue website for more information.
6.) Open a business bank account
Contact your bank or credit union about their process for opening a business bank account. If you are a Sole Proprietor, you will likely set up a dba (doing business as) account. For example, your account may be titled “Allen Smith dba Woodworking by Allen.”
If you are a sole proprietor, you are free to move money between your business and personal accounts as necessary. When it’s time to “pay yourself,” simply move money out of the business account into your personal accounts.
Remember, your business bank account is for business purposes only. Use this account for all business expenses an income. Track all of your expenses (including business miles driven) and keep receipts so that you are ready to file taxes at the end of the year.
Final Tip: Consider setting up an email address and/or website for your business
Set up a professional email address and website to provide a professional image for your customers. You can also use your business email address to create online business accounts through Paypal, Square, Ebay, etc.
Now, you are on your way to starting your own business! If you have further questions, you can likely find more information on your home state’s webpage. Colorado has an excellent resource on the Secretary of State website.
Best of luck!