The first step is arguably always the hardest. And deciding to officially open up a small business is no exception to that rule. You’ve been dreaming and scheming for months, perhaps even years. You’ve poured your blood, sweat and tears into this thing and now it’s time to take the next step. But what, exactly is “the next step” in starting up your small business? Read on to get a general idea of the start-up process and for more information, click through to any of the links we reference as they will take you to the Maryland State Business Resources page. Stay tuned to future blogs as we progress through the “lifecycle” of a small business, including: day-to-day tasks, closing a business, and all the stuff between! If you have any questions, please let the attorney at Ferrante & Dill, LLC know. You can call us at (410) 535-6100 or send us an email at firstname.lastname@example.org.
What Type of Business are you starting?
Yes, you obviously know that you will be selling artisanal soaps, but beyond that, you’ll need to identify your business structure. According to the Maryland Department of Assessment and Taxation, there are four common types of business structures; and you’ll need to decide which one best fits your business’ needs prior to going any further down this road.
- Sole Proprietorship
- Limited Liability Company
Choosing which type of business structure is really important; you may want to seek the advice of an attorney or accountant. The type of business structure you choose affects how much you pay in taxes, your ability to raise money, the type of paperwork you’ll need to complete and your own personal liability. The U.S. Small Business Administration breaks down each type of business structure, helping you to choose the structure that will give you the right balance of legal protections and benefits.
How to Register your business
Now that you’ve taken the very first step toward opening the doors of your small business, it’s time to get your business registered! Maryland has an easy, streamlined online process for registering small businesses through the Department of Assessment and Taxation. From this site you’ll be able to register your business with the state, establish your tax accounts, file your annual taxes and access your Certificates of Status.
Your Business and Uncle Sam
Once you register your business with the state, you’ll need to head over to the Internal Revenue Service to register for your Employer Identification Number (EIN). Your EIN is necessary for business and employee withholding, federal unemployment insurance, and other tax-related aspects of running a small business. You can access the IRS’s EIN website from the Maryland Business Express here.
For questions regarding taxes and withholdings, consider scheduling an appointment with a tax or financial advisor before you get any further down the road.
Will you need an Operating or Partnership Agreement?
It depends on what your business structure is. If you are sole proprietorship, you may not need an Operating or Partnership Agreement. However, if you have partners, it would be wise to have one of these established prior to going any further. If you have an LLC, you will need an Operating Agreement. An Operating Agreement outlines the business’ financial and functional decisions including: rules, regulations and provisions. Once the agreement is signed by all the members of the LLC, it acts as a contract binding them to its terms. Similarly, a Partnership Agreement is an agreement between you and your Partner(s) and lays out the duties and obligations of the Partners to each other and to the Partnership (your business). More on this topic in a later blog. Stay tuned!
Do I need Licenses?
Many businesses in Maryland require special permits or licenses to operate. Additionally, you and anyone you hire may require individual occupational and professional licenses. Once you get registered and have your EIN, take a look around Maryland’s licensing database and county licensing database to get an idea of what types of licenses and permits you’ll need to operate safely and legally within the state.
It’s hard to imagine your business, your baby, your brain child operating without you. But creating and putting a plan in place for a time when you may not be involved is one of the smartest decisions you can make to ensure your business stays up and running after you’ve stepped away. A Succession Plan will help to not only keep your business running smoothly, or help it close smoothly without any loose ends, but will protect your interests as a business owner as well. It’s sort of like estate planning for your business. In fact, estate planning and succession planning are closely related and should be coordinated. Business Succession Planning can be complicated; it would be helpful to contact an attorney and work closely with them to make sure you’re dotting all of your i’s and crossing all your t’s. Stay tuned for a blog that provides a lot more detail on Succession and Estate Planning!
Handling Government Contracts
There’s a lot of money to be made in government contracts. Again, Maryland’s Business Resource site comes through with some helpful information on finding and winning government contracts for your small business.
There are usually a certain portion of Govt contracts set aside for women and minority owned businesses, so you should consider that when creating your business structure and putting your team together. For more information on what qualifies as a minority-owned business in Maryland, visit the Minority Business Enterprise (MBE) Program website. From here, you can also submit an application to register your business as a minority-owned one.
Operating Spaces and covenants/zoning restrictions
Do you plan on operating your business out of your home? You’ll need to check with your county for specific restrictions on running a business out of your home. For example, in Calvert County, you’ll need to fill out an application for a Home Occupation Permit and, depending on your type of business, agree to the following (among other things):
- Employees can only be persons who utilize the dwelling (house) as a permanent residence
- You cannot hold appointments or have clients to the house for business reasons
- Everything pertaining to the business must be done within the dwelling
- You cannot store any equipment pertaining to the business outside
If you live in a neighborhood with a Home Owner’s Association (HOA), you’ll need to check the bylaws and covenants of your HOA agreement to ensure you are within your rights to set up a business in your home. Even though the county may say it’s okay, the HOA may say otherwise, and those are rules you’ll need to abide by.
In most cases, ready-built pad sites exist in established shopping centers throughout our area, but if you were searching for a space off the beaten path to set up shop, you’ll need to familiarize yourself with your county’s zoning restrictions.
Insurance: for your business & your employees
Once you get your business all registered and you’ve got your spot picked out, you’ll probably start to feel like you’re ready to hire some employees (if you haven’t already). You may want to put a pin in that for right now as it may be more prudent to shop out some insurance policies first. For both your business and your future employees.
Like car and health insurance, there are numerous companies out there offering small business insurance policies to help you cover the costs of liability and property damage claims. It can also help you replace lost income in the event that your business is unable to operate, due to a covered incident (think: weather-related). Create a list of needs and wants and shop around for the policy that best suits your needs.
Most employees consider health insurance to be one of the more important benefits that an employer can offer them, so you’ll want to make sure you’re not coming up short in that department. Offering quality health insurance can help you attract and maintain talented prospects. When choosing a type of insurance plan to offer your employees, be mindful of what your employee pool looks like. Younger employees may want a lower monthly premium with a higher deductible as they are less likely to use their health insurance; the same cannot be said for their older counterparts.
This can be a tricky thing to try and tackle on your own. Consider consulting an attorney, financial advisor, or an insurance agent for more help understanding what your business and employee needs are. We’ll be offering a blog that goes a little deeper into this topic a little later on. So, stay tuned!