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What is the Simplest Way to Start a Business? What is the Minimum I Need to Do?


Question: What is the Simplest Way to Start a Business? What is the Minimum I Need to Do?
For many people, business start-up seems overwhelming, with legal forms and insurance and tax issues. But starting a business does not need to be complicated or expensive. In response to a reader's question, here is a simple way to start a business:

Business Start-up Simplified
Business start-up does not have to be complicated, lengthy, or difficult. You can start a business very quickly and simply. Let's assume you are working from home, you have no employees, and you don't need to borrow money to get started. Here is a simple business start-up plan to help you comply with tax laws and with local, state, and federal regulations and to set up your business the right way:

Select and Register Your Business Name
Every task involved with starting a business requires that you have a business name. So choosing a name is a critical task; if you select a name already being used by another business in your area, you could have problems, and if you decide you don't like the name, it would be costly to change that business name. Check with your state to see if another business is using the name you want, and register your business name with your state, before you start making other business decisions.

Become a Sole Proprietor
You can start as a sole proprietor, which requires nothing except a business license from your city. You don't need to register with your state unless you are required to charge sales tax, and you can use your social security number as your business number. To keep it really simple, you can use your name as your business name, so you don't need to file a d/b/a (fictitious name or trade name) application.

Work from Home
If you can work from home, you don't need to find a location and then pay rent to someone else. You can also deduct your home business/office expenses from your taxes, if you use that area of your home "regularly and exclusively" for business purposes.

Set up a Business Checking Account
You will need a business checking account and you should be careful to keep your business and personal finances separate, so there is no question that you have a separate business entity. The IRS looks at the separation between your business and personal expenses at audit to make sure your business is legitimately a separate entity and not just a hobby.

Buy Small Business Insurance
You probably don't need business property insurance, unless you have expensive special equipment. You might want to look at liability insurance. If you are doing contract work for someone else, and something happens, you may not be covered under their liability insurance. Check to see if you can get a rider for your personal insurance, or an umbrella liability policy.

Find a Tax Adviser
If your business is simple, your tax return will be too. You will be filing a Schedule C - Small Business Profit and Loss Statement with your personal 1040, and most competent CPA's can help you. You should check with your CPA as you start your business to make sure you are keeping track of all deductions. Then you only need to check once a quarter and at tax time. Depending on where you live, you might not have to spend more than $500 for the year on tax advice. This cost, of course, gets deducted from your income to reduce your taxable profits.

Set up an Accounting System
You will definitely need to set up a simple business accounting system. You can use online resources or financial software to make it easier. But since you are doing this to maximize your deductions and minimize taxes, spend the time to start out right by keeping track of all business expenses.

Certainly there is more you can do, including setting up a different business structure, hiring employees, and finding a business location, but when you are starting out or if you just want to remain a solo business owner, you can do well with these minimal steps to start-up.

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