Have a crazy notion of becoming an entrepreneur and dreaming about starting a business? It might not be so crazy, especially since some of the best business ideas grow out of a person’s passion for something they love to do. If you’re thinking about making a go of it, you might be wondering how to get started?
One of the first steps is to get the documents you need in place. Let’s talk about some of the ones you may need to set up a business properly – and then others that will help keep it running smoothly.
Starting a Business
1. Business plan
Though not a legal document, a business plan is, arguably, the most important document needed to start a new business. It's the foundation on which you'll build the business. It is a written plan that describes your strategy, goals, products or services, and target market. This plan helps determine how feasible your business idea is and provides a roadmap going forward and is often an essential piece of information requested by bank loan officers and investors.
Tip: The Small Business Administration (SBA) has resources to help write your plan.
2. DBA and LLC
These are common business acronyms that officially define the structure of your business and require having the proper documentation drawn up and properly filed.
DBA stands for “doing business as” and is used by proprietors who want to conduct their business under a new name. A DBA registration may be filed with city, county or state agencies and permits the owner to conduct business under a name different from that of the owner. This registration does not provide any legal protection.
Note: DBA registration is required for sole proprietors to open a bank account and receive payments in the name of the business.
An LLC, or limited liability company, generally offers the business owner or partners protection from being personally liable for financial obligations of the business. It also provides trademark protection as well as the flexibility for the owners to choose how the business will be taxed.
3. Federal Tax ID
A federal tax ID is needed for any business structure other than a sole proprietorship. With a sole proprietorship, your Social Security number functions as your tax ID.
4. Licenses and permits
Most businesses need a license to legally operate within a jurisdiction. However, some state and local governments require special permits, certificates or additional licenses for specific types of businesses, such as restaurants or manufacturing facilities. The requirements and fees will vary depending on your business and where it is located.
Try out this calculator: What are my new business startup costs?
5. Sales tax license
If you are required to collect sales tax on the products and services you sell, you will need a sales tax license (also called a permit or registration in some states) to remit sales tax on the items sold by your business.
While not absolutely necessary, a trademark is a good way to protect your business logo and brand. Visit the U.S. Patent and Trademark website to learn more about trademarks.
7. Confidentiality Agreement
A confidentiality agreement or non-disclosure agreement is an important legal tool to protect your proprietary information. It prevents your sensitive and confidential information from being shared or stolen.
Running a Business
Once your business is up and running, you’ll want to ensure you keep things running smoothly with these important documents:
1. Financial Docs
These documents include profit and loss statements, balance sheets, bank statements and payroll reports. These can be used to measure the progress and financial health of your business. And they will be a must have to secure any business loans needed to support the growth of your business.
2. Employment Contract
You may also need a contract between you and your employees. Letting them know in writing what you expect of them, what they will be paid, and when either party can terminate the contract is good way to establish open communication.
Read: What Employees Want from an Employer in the Post Pandemic Workplace
3. Employee Handbook
An employee handbook expands on the employee contract and should clearly define your company's policies. You'll want to include things like your company’s core values, mission, vision and goals, dress code, attendance policy, time-off and vacation policies, employee benefits and perks.
Tip: See why and how Lakeland updated its Mission and Vision statements.
4. Non-Compete Agreement
Depending on your type of business, it may be beneficial to have a non-compete agreement for your employees. This agreement prevents employees from taking another job in the same industry for a set period of time, usually two to five years.
Having the right documents is important to setting up your business and ensuring its long-term success. There are plenty of free online sources available to get started, but we also recommend working with a trusted tax advisor and attorney to ensure your business is established on a firm foundation. Once your dreams become a reality and your business grows, you may need to revisit some of these documents to keep the momentum going.
Did you know? Lakeland Bank is recognized as a Preferred Lender by the U.S. Small Business Administration, the highest bank designation, reserved for top-tier lenders. We are committed to being a premier provider of small business financing under the U.S. Small Business Administration by recognizing the specific needs of the small businesses we serve and providing best in class service. Contact our SBA Team today for assistance!
If you found this blog helpful, check out Your Business for more business blogs.
Business Testimonials - Master Metal Finishers
My name's Jeff Almeyda, I'm the President of Master Metal Finishers. Back in 2007 was when we first started with Lakeland Bank. With the money from an SBA loan from Lakeland Bank, we were able to put in a new processing line which will not only enable us to put more jobs in the area, but enable us to expand into new markets we've never had before. The SBA application process was simple.