Small Business Startup
Listing the Startup Requirements
(Date posted: March 16, 2009)
During this step in your small business startup, you identify and list the startup requirements for your proposed business venture. These are the actions and objectives you should complete before starting actual business operations.
Before starting this step, you should have:
- Refined your product's features
- Developed the sales program to solicit customers
- Designed your venture's organization and operations
The previous steps show you how to do this.
The desired result of this step is a written list of the startup requirements for your business venture.
You will use the following topics to complete this step:
Go or no-go decision
You will use this list of requirements in the following steps to prepare for starting business operations.
Before using this information to start a business be sure to read the following notice: Disclaimer
Before beginning business operations, you must identify and satisfy all startup requirements. This especially applies to governmental and insurance requirements.
There are several ways to identify these requirements for your small business startup. Here are several suggestions to help you:
- Talk to accountants or bookkeepers, business friends, or retired businesspeople.
- Contact federal, state, and local tax authorities for their requirements. You probably can locate their websites on the Internet. The U.S. federal tax authority, the Internal Revenue Service (IRS), has a website at www.irs.gov.
- Contact a local insurance agent about appropriate insurance coverage.
- Contact a local or Internet bank about opening a business checking account.
- Contact a local or Internet telephone company about getting a business telephone.
Following is a checklist of questions that can help identify the requirements for your small business startup:
- Have you talked with your family about your proposed small business startup? Are they in agreement with your plans, or do they feel the plans are too ambitious? (Note: my advice is to start small, get profitable, and then expand.)
- What type of entity (sole proprietorship, partnership, joint venture, limited liability company, or corporation) will you use for business operations?
- What federal, state, and local governmental rules and regulations must you obey?
- What federal, state, and local governmental deposits, fees, identification numbers, licenses, permits, and/or registration forms are required for your small business startup?
- What federal, state, and local tax returns apply to you? When are you required to file them?
- What federal, state, and local governmental taxes must be collected from customers? How and when do you pay them over?
- What production and storage facilities will you need? Where will they be located?
- What production equipment, materials, and supplies will you need?
- Where will your home office be located?
- What home office furniture and storage units will you need?
- What office equipment and supplies will you need?
- What computer equipment, programs, and supplies will you need?
- What type of insurance policies (home business, property damage, liability, worker's compensation, etc.) will you need to safeguard yourself and your business property?
- How and when will you obtain any needed production and storage facilities and equipment?
- How and when will you obtain any needed home office furniture, storage units, and office equipment?
- How and when will you obtain any needed computer equipment and programs?
- What information and training will you need to produce and deliver your products? How and when will you obtain it?
- What information and training will you need to understand, plan, and manage your business operations? How and when will you obtain it?
- What information and training will you need to set up an accounting system to record transactions and produce financial statements and other reports needed to monitor and control business operations? How and when will you obtain it?
- How and when will you obtain any initial production materials and supplies?
- How and when will you obtain any initial letterhead stationery, business cards, and other office supplies?
- How and when will you obtain any initial computer supplies?
- How and when will you open a business bank account?
- How and when will you obtain a business telephone?
- How much cash and other resources will you need to finance your small business startup?
- Do you have any other questions relating to your small business startup?
I have used my own small business startup for this example. My answers to the checklist of questions should help you prepare your own answers.
(Note: If I had planned to hire any employees, engage in dangerous or regulated activities, or form any business entity other than a sole proprietorship, then I would have been subject to additional governmental requirements and restrictions.)
- Family discussion: I don't have any family members that would be affected by these plans.
- Business entity selected: Sole proprietorship.
- Local rules and regulations: There are zoning rules that restrict certain types of activities in a home business. These rules do not apply to my operations.
- Federal deposits, fees, identification numbers, licenses, permits, and/or registration forms: None apply to my initial operations.
- State deposits, fees, identification numbers, licenses, permits, and/or registration forms: When I start receiving money from the sale of my e-book, I will have to register my business with the Department of Revenue.
- Local identification numbers, registration forms, deposits, fees, licenses, and/or permits: None apply to my initial operations.
- Federal tax returns: When I start receiving money from the sale of my e-book, I will have to file Schedules C and SE with my annual Form 1040 U.S. Individual Income Tax Return. I also will be liable for filing quarterly payment vouchers (Form 1040-ES Estimated Tax for Individuals).
- State tax returns: When I start receiving money from the sale of my e-book, I will have to file periodic Combined Excise Tax Returns. The filing frequency will depend on my estimated annual revenue.
- Local tax returns: There are none.
- Federal taxes to collect and pay over: None.
- State taxes to collect and pay over: When I start receiving money from the sale of my e-book, I must collect sales tax on sales to certain customers. I must report these collections on my periodic Combined Excise Tax Returns.
- Local taxes to collect and pay over: There are none.
- Production and storage facilities: I will use my home office and website to produce and deliver the e-book. My web hosting company provides the storage facilities.
- Location of production and storage facilities: The production facilities are located in my home office. The storage facilities are located on the Internet.
- Production equipment, materials, and supplies: I will use my existing computer setup and computer supplies to produce and deliver the e-book. I do not use any other production materials.
- Home office furnishings: I will use my existing desk and chair, large bookcase, several storage cabinets, steel file cabinet, and wastebasket.
- Location of home office: It is located in the spare bedroom of my home.
- Office equipment and supplies: I will use my existing calculator and supplies.
- Computer equipment, programs, and supplies: My existing computer setup, programs, and supplies are adequate for my small business startup.
- Insurance: I need to obtain a home business endorsement to my existing homeowner's insurance policy.
- Obtaining production and storage facilities and equipment: I already have all the needed facilities and equipment.
- Obtaining home office furnishings and equipment: I do not need any additional items.
- Obtaining computer equipment and programs: I do not need any additional computer equipment and programs for my initial operations.
- Obtaining production and delivery information and training: I am already qualified to produce the e-book. I will set up a sales page on my website to allow customers to download their purchases. I will receive the required setup information from the Site Build It! web-hosting company. I pay them a monthly fee.
- Obtaining business management information and training: I am already qualified in business management. (After all, who is writing all this stuff?)
- Obtaining accounting system information and training: I plan to purchase the QuickBooks Pro computer program. I will receive the information and perform the training required after I purchase the program.
- Obtaining initial production materials and supplies: I don't use any production materials other than computer supplies, as shown below.
- Obtaining initial letterhead stationery, business cards, and other office supplies: I don't need any of these for my initial business operations.
- Obtaining computer supplies: This is an ongoing process. I pay cash for them at the local Office Depot store.
- Business bank account: After I have produced the first e-book, I will contact my existing bank and apply for a business checking account.
- Business telephone: After I have produced the first e-book, I will contact my existing telephone provider and request a second line and telephone number.
- Resources needed to finance my small business startup: Cash of $250, my existing home office and computer setup, and my past writings on small business operations.
- Other questions concerning my small business startup: None.
This decision concerns the list of startup requirements you prepared in this step.
Go on to the
Planning Costs and Expenses step in your small business startup if you can answer "yes" to the following questions:
- Do you know the answer to every question in the startup checklist that relates to your business venture?
- Are you ready to proceed with preparing for business operations?
If you have answered "no" to any of the above questions, go to this topic on another page for what to do next.
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