Administrative and Legal Procedure for Starting a New Business PDF

Administrative and legal procedure to start a new business  Business Start Starting a business is exciting but also demanding. An idea doesn't become a business without effort. We are going t...

Administrative and legal procedure to start a new business  Business Start Starting a business is exciting but also demanding. An idea doesn't become a business without effort. We are going to address some of the most common startup steps to ensure your company is ready for success. It involves planning, making financial decisions and completing a series of legal and administrative activities. 2 INTERNAL Business Launch Activities Tax identification numbers, licenses and permits Insurance Advisor Determining your legal business structure Opening a bank account Preparing yourself financially Doing proper bookkeeping Writing a founders' agreement Company name registration Protecting your intellectual property Merchandising 3 INTERNAL  How you choose to fund your business could affect how you structure and run your business. Self funding Way To Fund Investors Your Business Loans 5 INTERNAL Tax Identification Numbers, Licenses and Permits A federal tax identification number, or employer identification number (EIN), acts like a social security number and is required for corporations and LLCs that will have employees. Other types of taxes are compulsory for other business structures. Most businesses need licenses and/or permits to operate in your city, municipality, county and/or state. 6 INTERNAL  Insurance Some industries have specific insurance requirements. Discuss your needs with your insurance agent to get the right type and amount of insurance. Remember to check any other government tax and insurance requirements that might apply to your business, particularly if you have employees. For example: Unemployment insurance Workers' compensation Etc. 7 INTERNAL  Advisor Select an accountant and attorney. Many small business owners seek advice from accountants and attorneys. As you search for an accountant and attorney, get referrals from friends or family, and look for professionals who have worked with other small business owners or companies in your specific industry. 8 INTERNAL Types of Legal Structures Sole Proprietorship This is the simplest form of business, where one individual owns and operates the business. The owner is entitled to all profits but is also responsible for all the business's debts, losses, and liabilities. Partnerships This structure involves two or more people who agree to share in the profits and losses of a business. Partnerships can be general or limited (Limited Liability Partnership LLP), with general partners being fully liable for the business's debts while limited partners have limited liability. 9 INTERNAL  Types of Legal Structures Corporation Legal entity separate from its owners, providing the highest level of protection from personal liability for its shareholders. Corporations can be C corporations or S corporations, with different tax implications for each. C corporations are taxed at the corporate level and again at the shareholder level when dividends are distributed, while S corporations allow profits and losses to be passed through directly to the owners' personal income, avoiding double taxation. Cooperative This is a business or organization owned and operated for the benefit of those using its services. Profits and earnings generated by the cooperative are distributed among the members, also known as user-owners. 10 INTERNAL  Types of Legal Structures Limited Liability Company (LLC) An LLC combines the liability protection of a corporation with the tax efficiencies and operational flexibility of a partnership. Owners, known as members, are protected from personal liability for business debts, and profits/losses can be passed through to their personal income without facing corporate taxes. 11 INTERNAL 12 INTERNAL  Types of Business Models (Riley & Draper, 2024) 13 INTERNAL  Open a bank account It is crucial to separate business finances from personal ones. Most banks require company details, such as formation date, business type, and owner names and addresses. If your business is not incorporated, most banks will require a DBA (doing business as or fictitious business name). Contact your bank about requirements prior to opening an account. (Wolter Kluwer, 2023) 14 INTERNAL  Prepare Yourself Financially Equity? Debt? Grants? Line of credit? You may want to use an accountant, or handle finances yourself with a small business accounting solution. Either way, properly account for all business disbursements, payments received, invoices, accounts receivable/accounts payable, etc. And if you don’t have enough capital to start a business, this is also the time to seek funding from banks or through Small Business Administration (SBA) loan programs (US). Line of credit: This will help reduce the number of times your company prepays for purchased products and services. It also helps establish a strong credit history, which is helpful for vendor and supplier relationships. 15 INTERNAL Do Proper Bookkeeping In most places, you are obligated by law to record all business transactions according to a specific accounting method. See what is required of you for your industry and location in terms of record-keeping obligations and set up a proper filing and bookkeeping system for all documents and transactions. This will greatly help you down the line in doing taxes or if you ever run into other legal troubles. 17 INTERNAL Founders’ Agreement If your business operates with multiple business owners, it’s important to make sure that each person knows and understands their rights and responsibilities in relation to the business. How this comes about depends on your business structure. - Corporation: you need a proper shareholder agreement and articles of incorporation. - LLC: you will need articles of organization and an LLC operating agreement. You also need designated legal counsel to make sure the agreements and articles are sound. 18 INTERNAL Protect Your Intellectual Property Intellectual property (IP) is the bread and butter of many businesses. IP includes patents, copyrights, trademarks, and trade secrets as well. Be sure to file any patents as soon as possible a process that can take more than five years. This will be attractive to investors. IP can be quite complicated from a legal standpoint, so it might be wise to consult an experienced IP attorney. 19 INTERNAL  Registration After the brainstorming the business name, you can also consider registering your business name, logo and slogans with the U.S. Patent and Trademark Office so that you have recourse if somebody else uses them. United States Patent and Trademark Office https://www.uspto.gov/ Spain: OEPM https://www.oepm.es/es/index.html 20 INTERNAL 21 INTERNAL  Merchandising Create a business logo, cards and stationery. These items establish your company’s identity and help potential customers find and remember you. 22 INTERNAL References Balcells Group. (n.d.). Types of companies in Spain. https://balcellsgroup.com/types-of-companies-in- spain/#Sole_trader_autonomo_o_empresario_individual Camara de Comercio de España. Tipos de sociedades mercantiles en España. [Types of business entities in Spain]. https://www.camara.es/blog/creacion-de-empresas/tipos-de-sociedades-mercantiles-en-espana-cual-se-adapta-mejor-tus-necesidades Riley, J., & Draper, S. (2024). Entrepreneurship: how to start and grow your business. https://www.stukent.com/higher-ed/intro- entrepreneurship/ Stowers, J. (2024). How to start a business: a step-by-step guide. https://www.businessnewsdaily.com/4686-how-to-start-a- business.html US Small Business Administration. (n.d.) 10 steps to start your business. https://www.sba.gov/business-guide/10-steps-start-your- business Wolters Kluwer. (2023). Comparing types of business. https://www.wolterskluwer.com/en/expert-insights/compare-types-of-businesses- c-corp-s-corp-llc-and-dba 23 INTERNAL