Brought to you by Rocket Lawyer and the U.S. Chamber
of Commerce
Starting your own business can be
equal parts exciting and scary. It's invigorating to be your own boss, to make
your own hours, and to do the work you want to do each and every day, but it
can be scary when you can't count on a regular paycheck. In fact, many people
get so worried about the unknowns that they simply never take the first step
and actually start following their passion. And that's understandable, of
course. Being responsible for everything in a new venture means wearing a lot
of hats that you probably haven't worn before.
That's where we
can help. In this guide, we'll explain everything from choosing a name for your
business to incorporating and staying compliant. We'll help you identify
pitfalls before they sneak up on you and teach you how best to set up your new
business for success. After all, we help thousands of Americans start
businesses every month. Let us help you start yours.
CHAPTER 1
WANT TO START
A BUSINESS?
You've already got the
million-dollar idea, but are you the right person for the job? Starting a
business can be a risky venture, so making sure that you understand the chances
you're taking is never a bad idea. Plus, like we mentioned above, just thinking
through the risks and planning for them gives you a much better chance for
success when you decide to go for it!
A few important questions to
consider
Before you get
started, take an honest look at your goals, your skills, and your finances.
Which of them might you need help with? For example, do you have enough capital
to start outright or should you get a loan? How long can you run at a loss?
What aspects of the business are you not familiar with? No one else can answer
these questions but you, so be honest with yourself. Realizing that you don't
have enough expertise in one area doesn't mean that you should avoid starting a
business. It just means that you might need a little help.
Here are some
other questions to consider before you get too far into the weeds:
·
What is your product?
·
How is it unique?
·
Who are your customers?
·
How will you reach that audience?
·
How will you finance your business?
·
What is your exit strategy if things
don't go as planned?
·
Will you need employees?
If you're ready
to start a business, you essentially have two ways to get the process going:
starting from scratch and building your own business or purchasing an existing
business.
Starting a business from scratch
Most new
business owners start their own business from scratch—be it hanging up the
proverbial shingle or starting a website. Running a successful business
requires a good strategy; however, for now, you'll want to focus on the basics
that your business will need to get started.
Despite the
anxiety from setting out on your own, the act of forming a business isn't very
complicated. At a minimum, you'll need a name, state registration, and any
applicable licenses.
You'll also
want to seriously consider incorporating and writing a comprehensive business plan—they often aren't legally required,
but they're a good idea. Incorporation isn't just for people looking to start a
large-scale company; incorporation can benefit all sizes of businesses by
protecting your personal assets and making it easier to get loans. A business
plan, on the other hand, helps you think through some of the choices and
decisions you'll have to make as your business picks up steam. We'll go over
both business plans and incorporation a little later.
Buying an existing business
If you're
looking to buy an existing business, then a lot of the work covered in this guide
has already been done for you. However, even with that potential head-start,
you'll need to be extremely thorough in your vetting of any potential
purchases.
Be sure to go
over the business' books at length—and consider professional assistance if
you're not well versed in accounting. Carefully analyze the company's business
plan and make sure that everything is sound. You'll need to answer the same
types of questions that any other new business owner does: what's the product,
who's the target audience, and how is that product brought to market?
Ensuring that
you're making a good investment requires a lot of leg work and many selling
businesses aren't exactly forthcoming with negative information. So, if you
plan on going this route, be sure to pack a lot of patience and be prepared to
conduct a careful investigation of each potential business. Asking a business lawyer for advice is never a bad idea.
CHAPTER 2
HOW TO CHOOSE
A COMPANY NAME
Everyone has their own idea about
what makes a good name, but keep in mind that the name you choose will
represent your business and the brand that you’re seeking to build both now and
in the future.
So, what’s in a name? Being unique is a good start if you plan on
trademarking it, but would you prefer to be clever, humorous, or descriptive?
Is it memorable? Does your potential name lend itself well to building a
website? How will it fit into your brand?
A good test when you’re choosing a name is to live with it for a little
while. Come up with something and make sure that you don’t hate it in a week.
You’d be really surprised at how often that happens. If the name grows on you,
conversely, you might have yourself a winner.
Of course, choosing a name is fairly subjective. Some people choose to
aim for something memorable while others simply try to pick a descriptive,
clean name. The choice is up to you. But take care to get it right the first
time. That’ll save you the headaches and extra costs that come with rebranding
down the road.
Ensure the name isn’t taken
Now that you’ve
chosen your name, you want to make sure that it’s available. For obvious
reasons, you wouldn’t be allowed to call your café by the same name as the one
across the street. So, after you have a few name ideas of your own, it pays off
to check if any are taken. Often times this means checking your state and local
business registry—but you may also want to look into national trademarks,
websites addresses, and social media.
If someone owns
a website or Twitter account with your desired name, they may not stop you from
officially registering your name, but they can make building an online presence
more difficult. While marketing on social media may be a distant worry, carving
out space online when you select your name will pay dividends in the end.
Registering
your name
After you’ve
done your homework and selected the perfect name for your business, all that’s
left is to register it. Registration can be handled in several
ways:
1. Incorporate your business
3. Register a trademark
After
everything is filed away, you may want to consider trademarking your business
name. A trademark isn’t necessary to gain protection, but it provides legal
benefits should you ever need to defend your newly minted name in court. You
can take care of this down the line, of course, but trademarking isn’t too
difficult or expensive. We can help you register
a trademark when you’re ready.
CHAPTER 3
HOW TO
INCORPORATE
After you come up with the perfect
business name, you'll need to decide if you want to incorporate. Incorporating
isn't mandatory, but doing so can provide you and your business greater
flexibility, liability protection, and a more professional image. If you're serious
about your business, strongly consider incorporating it.
Why Incorporate?
Incorporation can be a benefit to any business, large or small. Each
incorporated entity type is different, but they share certain important traits
across the board. We'll go into some of the differences below; but for
starters, here are a few of the best reasons for incorporating your new
business:
·
Tax Benefits: LLC's and corporations allow you to draw a salary,
write off business expenses, and avoid taxes on some of your profits.
·
Liability Protection: Incorporated businesses are separate from their
owners. That means that if you get sued or your business doesn't succeed, your
personal assets generally won't be at risk.
·
Access to Capital: Banks and other lenders see incorporated entities as
more legitimate. You'll have an easier time getting cash to grow your business
and you can also distribute stocks.
Although it can vary from state to state, Incorporating is a fairly
simple process. However, in many states, all that is required is for you to
file articles of incorporation with your Secretary of State's office. We can help you incorporate. Just answer a few simple
questions, and we'll take care of the rest.
Perhaps the hardest part of incorporating is deciding which entity you'd
like to be. Let's take a look at the options:
·
Sole Proprietorship: A sole proprietorship is the default business entity.
In fact, sole proprietorships are automatically created simply by doing
business. Individual contractors and freelancers are often classified as sole
proprietorships.
It is very important to note that
Sole Proprietorships are NOT incorporated entities. That means there's no legal distinction between you
and your business. In other words, all business taxes are handled on your
personal filings (often called pass-through taxation) and your business
provides no personal protection from liability in the event that your company
is sued.
·
Limited Liability Company: A limited liability company (or LLC) is perhaps the
most popular small business structure. It gives you a lot of the benefits of a
corporation without some of the compliance hassles that come along with running
an S- or C-corporation.
Notably, LLC's create a separate legal entity, shielding the owners from
business liabilities—as long as the business actually remains a separate
entity. LLC's also practice pass-through taxation and can have any number of
owners, but cannot issue stock.
This business type is popular among restaurant owners and landlords,
among others.
·
S-Corporation: S-corporations (sometimes called S-Corps) are another
popular option for smaller businesses. S-Corps, like all corporations, enjoy
limited liability status. They can also issue stock (though are limited to 100
shareholders) and, unlike C-Corps, are not subject to double taxation.
On the other hand, S-Corps are not as flexible as LLC's and are subject
to more regulation. Only private U.S. citizens or legal residents can own an
S-corporation.
·
C-Corporation: C-corporations (or C-Corps) include the behemoths of
the business world. A C-corporation is the only entity that can issue an
unlimited amount of stock and different classes of stock. This unique feature
makes this business type near-mandatory for companies that rely heavily on
venture capital or numerous investors.
For many startups and solo-run businesses, however, the C-Corp may be
overkill. Unless you need to issue stock, you can gain many benefits of
incorporation simply by forming an LLC.
·
Partnerships: Partnerships are about what you'd expect: an agreement
between two or more individuals who all contribute and receive benefits from
their venture. While there are many different types of partnerships, they all
have basically the same principles behind them.
The drawback of partnerships is that they may dissolve if one partner
leaves, or if another joins. Standard partnerships also lack any liability
protection unless you form as an LLP—a limited liability partnership—which
insulates each partner from being liable or responsible for the actions of
another partner.
Many law firms are common examples of partnerships as they are
prohibited from incorporating as an LLC.
Changing Entities
If your
business outgrows its original entity, or if you simply change your mind, there
are options available to transform your business into the newly-desired entity.
If you're
currently a sole proprietor, then there's nothing to worry about. Incorporating
is often as easy as filing articles of incorporation.
For
corporations or companies there's more to consider; however, many states have
passed laws that make it significantly easier. The process is called statutory
conversion and is completed by filing a single form, typically called a
Certificate of Conversion. Completing and filing the certificate is all it
takes to change business entities. Easy.
If your state
doesn't allow statutory conversions, the process may be similarly completed
with a statutory merger. This is a roundabout way to do the same thing—first by
creating a new company with the desired business type and then merging the old
one into it. There are some more steps to complete with a merger, since it
requires creating a new company, rather than recategorizing an existing one,
but it's still fairly straightforward. If you have questions about changing
your existing business structure, we recommend that you ask a lawyer. If you're curious about your own
state's rules, check with your Secretary of State—we've compiled a list state
for you here.
CHAPTER 4
HOW TO WRITE A BUSINESS PLAN
"There
never was a good knife made of bad steel."
- Benjamin
Franklin
The business plan is often an unsung hero of success. Put simply, it's
your stated guide on how you plan to make it in the competitive world of
business. It's the culmination of your thoughts and research on what it'll take
to make your business a success. Your business plan is also a great tool for
marketing your ideas to potential investors or partners. As such, it is the
perfect place to show off what makes your product offering unique compared to
the rest of the competition—in addition to ironing out the details.
While your business plan needs to be unique to stand out, there are
certain other provisions that each and every entrepreneur should consider
before getting too far ahead. We'll walk you through what you should include in
your business plan:
1. An executive summary
There's a lot to cover in a business plan, so you'll want to make sure
that your main ideas are introduced up front. A brief executive summary at the
start of your business plan should include: basic information about your
product/service and your goals; an overview of your financials; and most
important, a concise outline of your strategy moving forward. Think of it as a
highlight reel, tailored specifically for the person reading your business
plan. Our best advice: Be relevant, but be
brief.
2. Company basics
First things first: you'll want to give an overview of your company.
What, exactly, is your business? Let's say you want to start a café, but why?
Do you aspire to be a national force, or do you hope to be a neighborhood
hideaway providing atmosphere and respite to a local customer base? What do you
sell—will you only serve coffee or do you plan on serving food complete with
handmade bread and home-grown produce?
In short: Who are you, what do you do, and why?
This is your place to lay out the ideas of your business and the factors
that will make it a success: location, unique product offering, or personal
expertise. Not only will business partners want to see a clear identity, but
they'll want to get a firm grasp on your ultimate strategy and, most
importantly, what sets you above the competition.
3. Organizational Structure
This section is intended to relay the structure of your business—from
business entity and management structure, to financial stake and the board of
directors. While this may seem like overkill in a one- or two-person operation,
it's still important if you plan on attracting investors. Afterall, no one
wants to throw money at a business without a clearly defined structure.
The first basic question to answer is who does what in your business?
You may be the founder and CEO, but are you also the lead engineer? Do you have
any partners or co-owners that also play important roles in business operation?
If the answer is yes, then that information should find its way into your business
plan.
If your company is larger, you'll also want to include a breakdown of
each department. The details may start to pile up, but the fact that they can
get muddled is exactly why it's important to straighten them out—for your sake
and to court investors.
The basic idea behind presenting your company's structure is to show
investors that you're organized and that you've accounted for every task that
needs to be done—no small feat. For you personally, it's a great time to ensure
that everything is ready to go smoothly. If you realize that you're going to be
doing everything yourself, then you may want to consider spreading the workload
around or hiring new personnel.
4. Survey of your market
This boils down to identifying and defining a target audience for your
product and addressing any other businesses on the competitive landscape. You
should start with an overview of your industry, pointing out historic trends,
its current size, and how it's expected to grow in the future.
For example: if you're looking to design a mobile app for Apple's app
store then you should cite how many people own iPhones and whether that number
is projected to increase. In addition, you would want to check on the trends in
app popularity—are more people downloading apps or has it plateaued? And even
if it has, is the market large enough to still go after?
For your audience, it's important to define a target market that you
believe you have a reasonable shot of capturing. Continuing with the app
example: if you were making a game, what percentage of the market would
actually be interested in it? Certainly a younger crowd might be easier to
target than an older crowd who may be more interested in a news or finance app.
Conversely, an app that aggregates stock market data probably wouldn't be a big
hit with the teen demographic.
Competitive analysis is the final consideration. To start, who are your
competitors? You'll need to predict your share of the market, how difficult it
will be to break into, how you'll price competitively, and emphasize what makes
your product unique. This part of the analysis is meant to address the
strengths and weaknesses of your product in relation to the market that you're
seeking to enter.
As an example: if you plan to open up a café on the corner, you'd need to
account for other restaurants in the area. You may be able to lure customers
away from their fast food habits, but national coffee chains may prove tough
competition if that's a focus of your business.
To round out your look at the market landscape, you should include any
relevant local and state regulations. While operating a café probably doesn't
have the amount of red tape that a fireworks business does, you should still
mention the more common regulations, such as zoning, along with the difficulty and
expense in obtaining specific licenses, if they will have an impact on
business. After all, you could own the only building in town zoned to allow a
bar, and that could mean great business.
5. Product description
Every business needs a product and you'll want to be sure that your
business plan highlights your unique offering in full. While not every product
is going to be a new invention, it still must target a need in the marketplace.
Any business plan should include a complete description of your product
or the services that you plan to offer. What does your product do? What makes
it stand out? You should also include in your plan any important details
surrounding the purchase of your product or services. For example, is it a
single purchase or a subscription service?
Aside from the basics, you should mention any intellectual property
that's relevant. If you are applying for patents, own them, or are licensing
some, it should be stated here. While this probably won't come up too much if
you're starting a café, it could be critical if you're designing a mobile app
or other piece of software.
Finally, what are your plans for the product? Unless you're selling
pasta sauce based on your family's generations-old recipe, you'll probably need
to update your service or product at some point. So, how is that going to
happen? Be sure to outline any procedures that you're considering for the
continued improvement of your product—be it periodic reviews and updates, or
hotfixes in case any complications pop up.
6. Marketing strategy and business logistics
After you've identified your product offering and who your target
audience is, the next logical question is how will you pair them up?
Sadly, unless everyone already knows about your business before you
open, you're going to need to do some sort of marketing—be it a newspaper ad, a
catchy sign, or a website. No matter the strategy, it needs to be in your
business plan.
A marketing strategy is also more than simply how you plan to build
awareness; you'll want to cover the logistics of your business, as well. How
many people are you going to attract; how will you supply that amount of
product; how will you represent your company while attracting your customers?
Furthermore, who's going to be doing the job? You'll want to mention if you have
a sales team, if you plan to hire an agency, or if you'll be doing it yourself.
7. Financial overview
The bottom line: it's not the most romantic part of running your own
business, but it's one that's impossible to ignore. It's critical that you have
a sound plan to fund the business.
Since this is a guide for starting a business, much of this information
will be based on the previous sections of your business plan—especially any
research into your target market. For now, however, make sure you list what you
can. Much of the business numbers will come later, but you should be able to
provide an accurate accounting of your starting capital and the initial
expenses you'll incur—be they from leasing office space or the starting
salaries for yourself and any employees.
After you've been operating, however, your goal will be to show your
expenses, profits, and a reasonable projection on what those numbers will look
like years down the road. Regardless, you should include the sources of funding
that you have, be it venture capital or your personal assets.
This data is of great interest to potential investors, partners, and
creditors. Not only that, but it should be of immense interest to you. Having a
solid plan to follow can help ensure that you're not trying to grow too much
too quickly and that any risk being taken is a manageable one.
Aside from just the bottom line, you should include a brief expense
report that details where your funding is going to end up.
Optional Sections:
Funding Requests
As previously stated, a business plan is a great way to show off and woo
investors. If that's your current audience, or if you need extra funding to get
started, then you can add a section to request those funds.
Whenever you request funding you'll need to be thorough and specific:
·
How much is needed?
·
Why? How will the money be used?
·
Will more funds be needed in the future?
·
What are your future financial plans?
·
What are your financial projections?
It's fairly basic, but anyone parting with their money will want to know
that you have a sound strategy for managing it.
Appendix
If you'd like, you can add on an appendix to tie together any loose
ends—be it résumés, credit reports, legal documents, or anything else.
Naturally, some of these documents are only relevant for certain audiences. For
example, potential investors would probably like to see photos and descriptions
of your product, while a bank would likely be more interested in your credit
history and financial planning.
Either way, an appendix is your section to add any additional
information that you feel is relevant.
CHAPTER 5
BUSINESS LICENSES, PERMITS & OTHER ESSENTIALS
Now that
you’ve got a plan for starting your business, you’ll still need to ensure that
you’re legally allowed to operate in your state and in your chosen field.
As you can imagine, your state has an interest in your business and
wants to make sure that you know what you’re doing. This interest manifests
itself through licenses and permits. Be sure to check with your state to see if
you need a license to practice your specific trade.
We’ll run you through a quick list of the common permits, licenses and
other essentials that you may need to apply for:
Employer Identification Number
(EIN)
This was covered in the naming a business section, but it’s worth
repeating since nearly every business will need one.
An EIN acts as your ID number for federal taxes and is required by all
businesses that do any of the following:
·
have employees
·
operate as a corporation or partnership
·
file tax returns for employment, excise, alcohol,
tobacco, or firearms
·
have a Keogh plan (a retirement account for
self-employed individuals)
·
are involved in estates (trusts and IRA’s), real
estate, non-profit organizations, farming cooperatives, or plan administrators
Doing Business As (DBA)
A DBA (doing business as) name is the legal name that you’ll be
operating your business under. Almost all businesses will need a DBA. As a sole
proprietorship, you’ll need a DBA if you’re operating under anything else than
your full name. For all other businesses, a DBA is required if you represent
yourself as something other than the name that you incorporated under. For
example, if you were running a business registered as “Justin’s Bagels and
Donuts” you’d need a DBA if you branded that shop as “Justin’s Bakery.”
Furthermore, many states require a DBA.
Fire Department Permit
If your business location will be accessible to the public, or if it
deals with any sort of hazardous materials, you’ll likely need a permit from
your local fire department.
Health Permit
Do you plan on preparing or producing food? Running a dry cleaning
business? If you plan on being in any industry that cooks, cleans, or handles any
potentially hazardous materials then chances are you’ll need a health permit,
too.
Zoning and Planning
Zoning is the control of land use by the state. No matter what type of
business you plan on starting, chances are you won’t be allowed to do it anywhere
designated as a residential area. You’ll also need to check with your city or
county to ensure that the area is zoned for commercial business. Similarly, if
you plan on operating a business out of your home, you’ll need to be sure that
it’s allowed.
It never hurts to be certain, especially if you plan on buying property
for your business.
Home Occupation Permit
Working from home is great, but if you’re running your business there,
many cities and counties require you to have a permit.
Sales and Use Permit (Seller’s
Permit)
Depending on your state, you may need this permit to sell any tangible
good and to collect sales tax.
Proof of Residency Requirement
If you’re going to have any employees, federal law requires that they be
eligible to work in the United States.
Professional Licenses
Many states require certain professionals to hold licenses—these can
often include, but are not limited to, attorneys, electricians, mechanics,
insurers, cosmetologists, and medical care personnel.
And More…
There’s a lot to go through when it comes to licenses and permits.
Fortunately, most states offer websites that make it easier to find any that
affect you. We’ll link to some of these resources in the final chapter of this
guide.
CHAPTER 6
BUSINESS
FINANCING
Every business needs funds to
operate. In general, there are four places to get the money needed to run a
business: you either have it already (lucky you), borrow it, are granted it, or
you receive capital from investors. Within each group, you'll have a few
options, so be sure to investigate each option and find the best fit for you
and your business.
With that in mind, your first task should be to determine how much money
you need to get your business off the ground and where that capital needs to go
to accomplish it. The further ahead you can plan for, the better off you'll be.
But for now, what's important is just accounting for the first few months of
business operation. Factor in the one-time costs, such as licensing fees, along
with recurring charges like rent and restocking your inventory.
After you've accounted for everything, you should have a clearer picture
of the cost of your initial startup and the costs of keeping it running in the
future. From here you can add any other expenses that you feel can make a
strong impact or subtract anything that isn't critical.
Now all you need to do is figure out where to get that amount. Easy,
right? Here are a couple of options:
Personal financing
Well, if you have funds already set aside for your business, there
really isn't much to cover—just be sure that everything is accounted for in
your financial planning and that you have a plan in case things don't work out.
Loans
Many businesses get their start by borrowing. Obviously, the drawback to
borrowing money is that you have to pay it back—with interest. The advantage is
that there is a loan for almost any purpose. Many organizations offer business
loans, including private lenders, credit unions, local governments, and
institutions like the SBA (Small Business Administration).
However, no matter the purpose of the loan or where you're getting it,
there are a few things you'll want to pay close attention to. Beyond the value
of the loan, you'll also want to examine the payment period, the interest rate,
and whether or not that rate is fixed. Be sure that the terms of the loan fit
within your business plan.
To apply for a loan, you'll need a lot of information about yourself and
your business. Most applications will require a full accounting of the money:
how much is needed, where it will be spent, and why. If you're properly armed
with an inventory of all your expenses and a solid business plan, these should
be easy questions to answer.
Also, you'll usually need to provide all the relevant documents relating
to you and your business. Here is an example of what is required for an SBA
general loan:
·
Personal background and financial statement
·
Business financial statements
·
Ownership and affiliations
·
Business certificate/license
·
Loan application history
·
Income tax returns
·
Résumés
·
Business overview and history
·
Business lease
Grants
Grants are hard to come by in the business world. Typically, grants are
given by the federal or local government and are usually only available for
non-commercial organizations (non-profits, charities, and educational
institutions). While this excludes a great number of startups, you still may be
able to find grants for certain services that benefit the public—such as
expanding a child care or health services business.
If you are in one of these fields, or plan on starting a non-profit
organization, you may want to start with the federal government or your state's Secretary of State office to see if
you are eligible. However, keep in mind that business grants, unlike normal
grants, often have stipulations attached that may place controls on how the
money can be used or require you to match the value of any grant money
received.
It's also worth noting that private grants may also be available. These
grants will vary greatly from industry to industry but it may be worth the time
to investigate.
Investors
Another way to raise money is to sell equity in the company. This is
fairly straightforward: a simple exchange of money for a share of ownership in
your business. This can be an attractive option if you can sell investors on
your business; however, you'll want to consider a few things when pursuing this
path.
First, be careful of how much equity you're actually selling. It may
seem obvious, but if you're not in control of the majority of your business,
you may be outvoted and out-leveraged when it comes to guiding your business.
Second, be sure your business structure is appropriate for investors.
Sole proprietorships, partnerships, and LLC's by definition cannot issue
stock—which leaves you with corporations. S-corporations can have up to 100
shareholders, while C-corporations can issue unlimited amounts of stock as well
as stock at different tiers. C-corporations are best suited for stock and
venture capital in general; however, they are more heavily regulated and do not
offer pass-through taxation—so don't rush into forming one without considering
all the benefits and drawbacks.
Regardless of where the money comes from, be careful before putting too
much of your money into your business too quickly. While everyone wants their
business to grow, you need to be certain that your money is well-spent and that
you're getting an acceptable return on your investment.
CHAPTER 7
HOW TO CHOOSE
A BUSINESS LOCATION
Just as with naming your business,
finding a place to effectively operate is a personal decision. Working out of
your home might suffice for a writer or private consultant; however, if you're
aspiring to start a restaurant or salon, you may need to look elsewhere.
As always, part of picking the perfect office is purely subjective.
Everyone has their own ideas about what makes a good work environment—be it
simply a quiet place to work undisturbed or a more modern-industrial style to
inspire creativity.
Location, Location, Location
The non-subjective part of picking an office, however, needs to be a
focus, too. Before you buy or rent any space for your business, you should be
absolutely sure that you'll be able to operate there effectively in terms of
your marketing strategy and your local zoning restrictions.
For a restaurant or similar type of service, you'll need to consider how
the locale fits into your business plan. Location affects the visibility of
your business. After all, it can be a lot harder to find customers if they
can't find you. The economic practicality of office location should be a
concern if you plan on running any sort of brick-and-mortar operation that
needs to attract customers.
Beyond economics, you also need to be sure that any area is zoned to
allow your business. Even if everything else about the place is perfect, it
won't do you much good if you're not legally allowed to run your business
there. While zoning and neighborhood restrictions can be argued, it can be a
difficult process—and one that may ultimately end against you—so do your
homework.
Renting Office Space
Property is
expensive; and depending on where you plan to set up shop, it may be a better
idea to rent office space. If that sounds familiar to renting an apartment, it
is; however, you should be aware that commercial leases can be much different.
This isn't to say that commercial leases are unwieldy; simply that you'll have
other concerns and priorities when you enter into one.
First, unlike
residential leases, commercial leases may last much longer—sometimes up to 5 or
10 years. This is generally a good thing because, unlike when you move
personally, moving a business means a lot more than sending out a moving
announcement and forwarding your mail. You will also have to invest in
marketing your new locale and rebuilding your customer base. With that in mind,
a longer lease term may be great, but new businesses should still be careful.
Leases are legally binding contracts; so if your situation changes, you should
be sure that you're not stuck with something that you can no longer handle.
Second,
commercial leases typically involve more negotiation. This can include anything
from the lease term, termination clauses, or how much upkeep you are expected
to take care of as the lessee. Not just that, but you can contract for just
about anything—so if you have concerns, be sure to address them.
As you can
imagine, however, there are certain terms that will appear in just about any
commercial lease that you should pay close attention to. You should have a clear understanding of these points:
·
Lease term: When the lease begins and how it ends
·
Early termination: Can the lease be ended early, and if so, how? Which parties can exercise this ability?
·
Rent: Not just how much you're paying, but how much it can
increase year over year
·
What is being leased: Your office space may be attached to others or part of
a larger office, so be sure that you know what you're getting in terms of
shared space and storage—in addition to what your maintenance responsibilities
will be.
·
Maintenance: Once you know what you're getting, you should know how
much you're expected to maintain. Just your
area? Common areas, too?
·
Net leases (insurance, property tax,
maintenance costs): Who pays for all of this? Is
everything included (gross lease), or are you expected to cover all three
(triple net lease)?
·
Advertising: Are you allowed to post signs? If so, where and what
are the limits?
Above all else,
take careful stock of your finances if you're looking to find an office.
Whether you're buying or renting, adding property to your business is a big
investment so be absolutely sure that it's both within your means and the best
choice available.
Regardless of
which avenue you pursue, be sure to take advantage of the financial
opportunities that come with it. Improvements to property could turn into into
tax write-offs—even the humble home office is eligible for tax credits.
CHAPTER 8
SMALL BUSINESS
RESOURCES
Business is unpredictable—from the
Roaring '20s to the Great Depression, the Golden Age of Capitalism to the
recession of the '70s, to the tech boom and its bust—no matter the economy or
the year, business has left both ruin and tremendous success in its wake.
So what can you do to make sure that you're on the right side?
Well, aside from a lot of luck, your best bet is to prepare as best you
can. No one can guarantee your success or give your unique business perfect
advice, but you can ready yourself to adapt to changes and prepare to weather
any storm.
Let us help you!
Whether you are considering incorporating, or just want to make sure
that you're not missing anything crucial, we're here to see you through. Check
out any of the resources below to get started.
Business Formation and Licensing:
Free Business Tools:
Essential Documents:
Corporate Compliance:
Other Resources:
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