The next generation might not know what Benjamin Franklin was talking about when he said “A penny saved is a penny earned.”
That and so many other cliches we take for granted related to money. Lucky penny…pennies on the dollar…penny for your thoughts…see a penny pick it up, all day long you’ll have good luck.
Why? Because penny abolitionists want to get rid of them. Yes, I said penny abolitionists – they’re real (even former President Obama is one).
A big reason for this? The cost—3 cents for every penny made. What do you think? Do we really need the penny anymore? Well, to make change for 99-cent bargains and other penny-riddled price tags, I suppose.
So, why the penny talk?
Because this is a good moment to think about payment systems and pricing in your Miami Metropolitan business. How would the elimination of the penny affect that? And if you’re starting a business, it’s an even more important possibility to consider from the outset.
If you already run a small Southeastern FL business and have to make that shift, plan ahead for how to round prices. If you haven’t adjusted prices for inflation, this might be the perfect excuse to do that. Make sure to keep pricing fair and transparent for your customers.
Of course, you can forego the cash route altogether and opt for digital payments for your services. Plenty of businesses do that. And if you’re at the beginning stages of business ownership, you can pull this off more easily now than making the switch later. It’s one of the many things you’ll want to consider in your planning list.
Now, last week I talked about the steps to follow for starting a new business and stopped about halfway through because there was so much to cover. So I’m picking that thread back up this week to talk about business structure types, requirements for filing the legal documentation, and operational setup.
Here’s part two…
How To Start Your Southeastern FL Small Business, Part Two
“If you’re not embarrassed by your first version, you launched too late.” – Gary Vaynerchuk
Since I covered some of the preliminary business planning considerations in my last note, we’re moving into the formal business startup process today.
So let’s dive into the good stuff.
Legal Requirements and Business Structure
The legal requirements for starting a business are going to vary by state, so search online for your state’s specific rules.
Generally speaking, you’ll need to choose a business entity (more on that below), choose a business name, check to see if that name is available with your state, register your business name with your state, register for a federal EIN* (Employer Identification Number), open a business bank account (you’ll need an EIN to do this, plus it will come in handy for paying all of those registration fees), and check into any state-mandated business licenses or permits required for your type of business.
*Note that not every business needs an EIN. If you don’t have employees, many sole proprietors and single-member LLCs aren’t required to get one. But they are free and it provides for easier scalability down the road.
All of this will take some time and patience. Be prepared to fill out multiple online forms and be sure to save all of your registration documents in a safe place. Fortunately, most of it can be done online these days.
But the first step is to decide about your business structure (also called business entity). This is a great opportunity to consult with someone like me who can walk you through the advantages and disadvantages of each of the business structure types, as it relates to your venture.
So give me a call to have that conversation: (786) 693-9358
Before we talk, here are the basics of the most common business structure types. Your choice here determines what taxes you’ll pay and how you’ll pay them.
- Sole proprietorship – This is the simplest type of business entity, where the owner is the business. Business income is reported on the owner’s personal income tax return, and the owner is liable for all business debts.
- Partnership – Two or more people own the business, and income and losses are divided among partners based on their partnership agreement. Like a sole proprietorship, each partner reports their share on their personal income tax return and partners are personally liable for business debts.
- Limited Liability Company (LLC) – Owned by one or more members, an LLC can be taxed as a sole proprietorship, partnership, or corporation. By default, they’re taxed as a pass-through entity (sole proprietorship or partnership), where profits and losses pass through to the members’ personal tax returns.
- Corporation – This is a more complex business structure where the company is owned by shareholders. It’s a separate legal entity from its owners, and it’s subject to corporate income tax, where dividends paid to shareholders are subject to double taxation (corporate level and personal level).
- S Corporation – An S Corp is a pass through entity where profits and losses pass through to shareholders’ personal tax returns. There’s no corporate income tax, and it’s limited to 100 shareholders.
Of course these are very basic definitions, and there are more nuances to each that we should discuss as it relates to your new business.
Setting Up Operations
Now that we’ve made a plan, carefully selected an entity from the available business structure types, and filed all necessary legal docs, let’s focus on a few operational tasks.
Logistical considerations should start with deciding on your physical location for doing business, and whether that’s a lease or purchase decision. From there, you’re setting up workspaces, pricing and establishing relationships with supply vendors, and figuring out how to store and track inventory.
Lots of decisions to be made in this stage that you’ll probably end up changing later after either trying it out and finding it doesn’t work well, or growing to the point that it all needs to be adapted for scale. It’s all part of the journey so don’t beat yourself up for needing to pivot halfway through.
Then think about your approach to marketing. Define your target market (this is really important), develop a brand identity, figure out where your market is hanging out, and make a plan for reaching them there. Outside help is very useful in this area; you can only do so much yourself.
And of course, you might need employees. The biggest thing to note here from a tax standpoint is that you’re setting up payroll properly and paying all associated taxes, because the government will notice if you’re not. Also dig into the applicable labor laws for your state and industry.
Other elements of operations to plan: technology infrastructure, insurance coverage, employee training, data security, and product distribution. Of course there are a thousand nuances depending on your business type, industry, and location, but my intent here was to get you started on the right foot.
If this sounds like a lot and makes you feel overwhelmed, that’s probably a good thing. Starting a business is a long process, and you’ll need help along the way. Don’t be afraid to ask for it:
calendly.com/ralfheyer/30-minute-meeting
Let’s do this together,
Ralf Heyer