Ten Things You Should Know Ten Things You Should Know About Starting A BusinessAbout Starting A Business

Legal and Start up ConsiderationsLegal and Start up Considerations

Telaekah Brooks, JDTelaekah Brooks, JD

Dean, School of Professional StudiesDean, School of Professional Studies

Trinity Washington UniversityTrinity Washington University

The 10 Things to Legalize Your The 10 Things to Legalize Your Home Based BusinessHome Based Business

Define your idea thru business planningDefine your idea thru business planning– Describe your business, what you sell, who buys it and Describe your business, what you sell, who buys it and

how it will be managedhow it will be managed

Obtain an EIN Obtain an EIN Find a Location and get Certificate of Occupancy Find a Location and get Certificate of Occupancy PermitPermitDecide upon a legal structureDecide upon a legal structureGet Incorporated!!Get Incorporated!!Get Licensed (if needed)Get Licensed (if needed)Register with your local tax officeRegister with your local tax officeOpen Bank AccountsOpen Bank AccountsGet insuredGet insuredGet Started!!Get Started!!

The Importance of Business The Importance of Business PlanningPlanning

Creating a RoadmapCreating a Roadmap– What is your business?What is your business?– Where will it be located?Where will it be located?– What will it sell or produce?What will it sell or produce?– Who will buy it?Who will buy it?

Telling Your StoryTelling Your Story– Why are you starting this business?Why are you starting this business?

Getting FundedGetting Funded– How much money do you need?How much money do you need?– Where will you get the money to get started?Where will you get the money to get started?

Describe Your BusinessDescribe Your Business

•Mission StatementMission Statement•Legal StructureLegal Structure•Products & servicesProducts & services•LocationLocation•Management & personnelManagement & personnel•InsuranceInsurance•TaxesTaxes•SecuritySecurity•RecordkeepingRecordkeeping

What Are you Selling or Producing?What Are you Selling or Producing?Most businesses are built around products Most businesses are built around products and/or services already available. A fish market and/or services already available. A fish market for example has a simply described product for example has a simply described product line (seafood); the service element involves line (seafood); the service element involves how they process the product and satisfy their how they process the product and satisfy their customers. customers. If your products or services are unique, state-If your products or services are unique, state-of-the-art, or otherwise noteworthy, take of-the-art, or otherwise noteworthy, take advantage of it. Such differentiation is advantage of it. Such differentiation is valuable, tends to be fleeting, and attracts valuable, tends to be fleeting, and attracts imitators. imitators.

Obtain an EIN Obtain an EIN EIN stands for Employer Identification EIN stands for Employer Identification Number. This is a unique number given to Number. This is a unique number given to you (at no charge) by the IRS. you (at no charge) by the IRS. This is the one number that you will need This is the one number that you will need to open bank accounts, get incorporated, to open bank accounts, get incorporated, file taxes, etc.file taxes, etc.Your state will use your EIN as the basis Your state will use your EIN as the basis for the ID number that they will give your for the ID number that they will give your business.business.You can file for EIN by completing the form You can file for EIN by completing the form SS-4 or by calling (800) 829-4933.SS-4 or by calling (800) 829-4933.

Where Should Your Business be Where Should Your Business be Located?Located?

Factors to consider:Factors to consider:– Type of buildingType of building– Organization of spaceOrganization of space– ParkingParking– Transportation accessibilityTransportation accessibility– TrafficTraffic– Community residentsCommunity residents– Target MarketTarget Market– IncentivesIncentives

What Kind of Space Do You Need?What Kind of Space Do You Need?

Plan your spacePlan your space

How much space should you set aside How much space should you set aside for offices? How much storage do you for offices? How much storage do you need?need?

How will you utilize your storefront? How will you utilize your storefront? What about signage?What about signage?

How much display space do you need?How much display space do you need?

Let’s talk basic consumer economicsLet’s talk basic consumer economics

Obtain an eHOP or Certificate of Obtain an eHOP or Certificate of Occupancy PermitOccupancy Permit

In the District, you can obtain an eHOP or In the District, you can obtain an eHOP or expedited home occupancy permit by expedited home occupancy permit by agreeing not to do certain things. With an agreeing not to do certain things. With an eHOP, you can operate a home office- eHOP, you can operate a home office- even if its in rental property.even if its in rental property.

For commercial properties, you will need a For commercial properties, you will need a certificate of occupancy permit. Most certificate of occupancy permit. Most properties will already have one, so make properties will already have one, so make sure to ask for it when you sign a lease.sure to ask for it when you sign a lease.

Management & PersonnelManagement & PersonnelAbout your principals:About your principals:– Business BackgroundBusiness Background– Management ExperienceManagement Experience– Educational BackgroundEducational Background

About your staff:About your staff:– Types of staff you will needTypes of staff you will need– Duties and responsibilitiesDuties and responsibilities– Policies and procedures (employee Policies and procedures (employee

handbook)handbook)

Personnel Con’tPersonnel Con’t

TimesheetsTimesheets

Work SchedulesWork Schedules

Classes of employeesClasses of employees

Pay rates/tablesPay rates/tables

Full- time vs. part- time vs. Full- time vs. part- time vs. independent contractorindependent contractor

BenefitsBenefits

Decide Upon a Legal StructureDecide Upon a Legal Structure

Sole ProprietorshipSole Proprietorship

PartnershipsPartnerships– General PartnershipsGeneral Partnerships– Limited PartnershipsLimited Partnerships

Limited Liability CompanyLimited Liability Company

CorporationsCorporations– S Type CorporationsS Type Corporations– C Type CorporationsC Type Corporations

Sole ProprietorshipSole ProprietorshipIn a sole proprietorship, you have all In a sole proprietorship, you have all of the control and all of the liability. It of the control and all of the liability. It is the easiest to start, and usually is the easiest to start, and usually does not require significant licensure. does not require significant licensure. You run the show and keep the You run the show and keep the money. money. Major Downside: You are completely, Major Downside: You are completely, 100% personally liable if something 100% personally liable if something goes wrong.goes wrong.

PartnershipsPartnershipsGeneral PartnershipsGeneral Partnerships– These are relatively easy to start by requiring These are relatively easy to start by requiring

only 2 or more people. This type of business only 2 or more people. This type of business requires little licensure and is easy to run. requires little licensure and is easy to run.

– All partners share in the management of the All partners share in the management of the business, the profits, and the personal liability.business, the profits, and the personal liability.

– Major Downside: You can be liable for the Major Downside: You can be liable for the actions of your partner, and it is sometimes actions of your partner, and it is sometimes difficult to manage disputes.difficult to manage disputes.

More on PartnershipsMore on PartnershipsLimited PartnershipsLimited Partnerships– Limited Partnerships are a little more complicated to Limited Partnerships are a little more complicated to

start and do require some incorporation in most states.start and do require some incorporation in most states.– Though you can start an LP with just 2 people, there is a Though you can start an LP with just 2 people, there is a

catch:catch:– At least one partner is limited and one is general. The At least one partner is limited and one is general. The

limited partner is like a silent partner- they get to avoid limited partner is like a silent partner- they get to avoid most liability, but have to give up management control most liability, but have to give up management control to get it.to get it.

– The general partner has management control- and is The general partner has management control- and is fully liable if something goes wrong.fully liable if something goes wrong.

– Major Downside: It is hard for limited partners to resist Major Downside: It is hard for limited partners to resist the urge to manage.the urge to manage.

Limited Liability Companies (LLC)Limited Liability Companies (LLC)LLCs were designed to provide you with LLCs were designed to provide you with the best of two worlds:the best of two worlds:– The flexibility and ease of ownership found in a The flexibility and ease of ownership found in a

sole proprietorshipsole proprietorship– And, the restricted personal liability of a And, the restricted personal liability of a

corporation.corporation.– These can be started with just one These can be started with just one

owner/member and little investment. They do owner/member and little investment. They do require incorporation in most states.require incorporation in most states.

– Major Downside: More complicated than a sole Major Downside: More complicated than a sole proprietorship- but the restricted liability can proprietorship- but the restricted liability can be worth it.be worth it.

CorporationsCorporationsS Type CorporationsS Type Corporations– These require formal incorporation in every These require formal incorporation in every

state. state. – You are required to have a Board of Directors, You are required to have a Board of Directors,

which sets policy and controls the President of which sets policy and controls the President of the corporation. the corporation.

– It can be a complicated process, Board It can be a complicated process, Board members and Officers have little personal members and Officers have little personal liability, and shareholders are taxed on liability, and shareholders are taxed on dividends.dividends.

– Major Downside: Most small business owners Major Downside: Most small business owners try to run corporations like sole proprietorship- try to run corporations like sole proprietorship- forgetting to keep good corporate records and forgetting to keep good corporate records and “buy” ownership in their business.“buy” ownership in their business.

More on CorporationsMore on CorporationsC Type CorporationsC Type Corporations– This type of structure also requires formal This type of structure also requires formal

incorporation in all states. incorporation in all states. – This is the most complex business structure, This is the most complex business structure,

which is subject to stricter regulations by the which is subject to stricter regulations by the gov’t.gov’t.

– Though the personal liability of owners is Though the personal liability of owners is shielded, there is not total protection against shielded, there is not total protection against lawsuits.lawsuits.

– Shareholders, Board members, and officers run Shareholders, Board members, and officers run the businessthe business

– Major Downside: Complicated management Major Downside: Complicated management structure, “double taxation” on earnings.structure, “double taxation” on earnings.

Get IncorporatedGet Incorporated

Getting incorporated is the process Getting incorporated is the process for registering your business with for registering your business with your local government. Being a your local government. Being a corporation indicates a specific corporation indicates a specific business legal structure- there’s a business legal structure- there’s a big difference!big difference!

Get LicensedGet Licensed

Find out if your local jurisdiction or Find out if your local jurisdiction or state requires your business to state requires your business to licensed.licensed.

You can find this out at www.dc.gov, You can find this out at www.dc.gov, maryland.govmaryland.gov, or , or virginia.govvirginia.gov..

Register for Local Business TaxesRegister for Local Business TaxesCorporate franchise taxCorporate franchise tax– In most states, your business will have to pay corporate In most states, your business will have to pay corporate

income taxes on income made in that state. Rates will income taxes on income made in that state. Rates will vary based upon locationvary based upon location

Sales and Use TaxesSales and Use Taxes– The general rule here is that you must pay sales tax for The general rule here is that you must pay sales tax for

all retail products that you sell. You can usually elect to all retail products that you sell. You can usually elect to pay monthly or quarterly.pay monthly or quarterly.

Personal Property TaxPersonal Property Tax– Many states require you to pay taxes on the aggregate Many states require you to pay taxes on the aggregate

value of your business possessions.value of your business possessions.

Employer TaxesEmployer Taxes– Some can be deducted from the gross salaries of your Some can be deducted from the gross salaries of your

employees- withholding taxesemployees- withholding taxes– Some come out of your pocketSome come out of your pocket

Open Bank AccountsOpen Bank AccountsResearch local banks to find out which Research local banks to find out which ones have the services that your business ones have the services that your business will need.will need.

You will need your EIN and a certificate of You will need your EIN and a certificate of incorporation to open your accounts.incorporation to open your accounts.

Realize that most banks have specific Realize that most banks have specific requirements that will impact your requirements that will impact your business- many don’t loan to restaurants business- many don’t loan to restaurants or hotels.or hotels.

Business InsuranceBusiness Insurance

General Business Liability InsuranceGeneral Business Liability Insurance

Workmen’s CompensationWorkmen’s Compensation

BondingBonding– Performance bondsPerformance bonds– Tender bondsTender bonds

General LiabilityGeneral LiabilityA Commercial General Liability (CGL) A Commercial General Liability (CGL) insurance policy is the first line of defense insurance policy is the first line of defense against many common claims. against many common claims.

General Liability insurance covers claims of bodily injury or General Liability insurance covers claims of bodily injury or other physical injury or property damage. It is frequently other physical injury or property damage. It is frequently offered in a package with Property insurance to protect offered in a package with Property insurance to protect your business against incidents which may occur on your your business against incidents which may occur on your premises or at other covered locations where you normally premises or at other covered locations where you normally conduct business. Commercial General Liability enables conduct business. Commercial General Liability enables your business to continue operations while it faces real or your business to continue operations while it faces real or fraudulent claims of certain types of negligence or fraudulent claims of certain types of negligence or wrongdoing. wrongdoing.

Workmen’s CompensationWorkmen’s CompensationThis insurance protects you, the business owner, This insurance protects you, the business owner, from financial devastation in the event that an from financial devastation in the event that an employee is injured on the job. It also helps the employee is injured on the job. It also helps the employee return to work with little or no loss of employee return to work with little or no loss of income. It provides:income. It provides:– Legal protection for the business ownerLegal protection for the business owner– Income, medical and rehab benefits for employee work-Income, medical and rehab benefits for employee work-

related injuriesrelated injuries– Payment to surviving family members if your employee Payment to surviving family members if your employee

is fatally injured on the jobis fatally injured on the job– Employer’s liability insurance (including damages due to Employer’s liability insurance (including damages due to

a third party) for care and loss of services for a third party) for care and loss of services for consequential body injury to a family memberconsequential body injury to a family member

BondsBondsPerformance BondsPerformance Bonds– Most capital works projects require this type of Most capital works projects require this type of

bond.bond.– This bond is an indicator that your company This bond is an indicator that your company

has the necessary skills and capabilities to has the necessary skills and capabilities to carry out the required work and comply with carry out the required work and comply with the terms of the contract.the terms of the contract.

Tender BondsTender Bonds– Bid or Tender bonds provide a financial fallback Bid or Tender bonds provide a financial fallback

for the contracting agency in the event that for the contracting agency in the event that you are unable to finish the contract.you are unable to finish the contract.

Get Started!!Get Started!!

Develop marketing materialsDevelop marketing materials

AdvertiseAdvertise

Explore Certification options- LSDBE, Explore Certification options- LSDBE, SDB, etc.SDB, etc.

NetworkNetwork

Good Luck!!Good Luck!!

ResourcesResourcesFor stats: www.census.gov, For stats: www.census.gov, www.dcmarketingcenter.comwww.dcmarketingcenter.comFor transportation information: www.ddot.dc.gov, For transportation information: www.ddot.dc.gov, www.dot.gov, www.maryland.gov, www.dot.gov, www.maryland.gov, www.wmata.orgwww.wmata.orgFor insurance info: www.statefarm.com, For insurance info: www.statefarm.com, www.geico.com, etc all have insurance types. Get www.geico.com, etc all have insurance types. Get the info and then pick the company you want the info and then pick the company you want based upon the size and qualities of service that based upon the size and qualities of service that they can give you.they can give you.For tax info: www.dc.gov, www.maryland.gov, For tax info: www.dc.gov, www.maryland.gov, www.virginia.govwww.virginia.govFor your Dunn and Bradstreet number: For your Dunn and Bradstreet number: www.dnb.comwww.dnb.com