Checklist for Starting a Business

And Setting Up an Office

Creating a checklist may seem boring, but a checklist provides the end-users with a process that enables the business owner and service provider to identify processes that are useful to build and someday sell the company. This article contains such a list. This article provides a guide of the issues that need to be considered by someone starting a business. No opinions are offered or should be inferred. You can use this to advise clients and should also advise them to seek professional guidance and advice where necessary on some of the issues.

Introduction

Creating or using a checklist may seem boring, but a checklist provides the end-users with a process that enables the business owner and service provider to identify processes that are useful to build and someday sell the company. This article contains such a list.

This article provides a guide of the issues that need to be considered by someone starting a business. No opinions are offered or should be inferred. You can use this to advise clients and should also advise them to seek professional guidance and advice where necessary on some of the issues.

Clients should engage an attorney to review all legal documents such as leases, buy-sell agreements, bank loans and loan covenants, letters of credit, governance documents if there are multiple owners or family members working in the business, franchise agreements, vendor of customer contracts, employment contracts and employment terms fact sheets, and any other written document of a legal nature or that might confer rights or restrictions upon either party.

Starting a Business Checklist

1. Business name—a person’s name or names, or a fictitious name such as “Smarty Pants Business Associates.” Assumed names need to be registered with the local County Clerk
2. Type of entity (choose one of the following). See questions that follow before deciding. Use an attorney where applicable:
   1. Sole proprietorship
   2. Single member LLC
   3. General partnership
   4. Limited partnership
   5. Limited Liability Company
   6. Professional limited liability company
   7. S Corporation
   8. C Corporation
3. Determine state of organization
   1. Usually it would be the state you will be doing business in
   2. If you have a choice of state where the business would be organized in or located, try to pick the state with the lower taxes
4. Decide if the business’ premises will be rented or owned, or if you will be working out of your house
5. Location if you will have a retail business
6. If property or assets will be transferred from another entity, find out the tax consequences of this; certain transfers can be done tax free while others might cause a tax liability
7. If business will have inventory, where will it be kept and in rented or public warehouses (this might determine the state of organization)
8. Is business part of a controlled group or related entities. This possibly would affect the decision about entity and location.
9. If business will own real estate, consider a pass-through entity, unless it is foreign owned, and then the decision should be that considers the taxability of the foreign owner in the United States
10. If foreign ownership, consider the following:
    1. An entity that is NOT a pass-through entity
    2. Become familiar with United States withholding requirements for distributions
    3. Determine whether there is a tax treaty with country where owners are. This is very important and would affect the tax rate of the withholding
    4. The foreign owner must become familiar with how they will be taxed in the United States
    5. You would need the address of the owners and other identifying information and proof of identity
    6. You would need to become familiar with the disclosure requirements in the United States of foreign owners
11. Obtain a Taxpayer Identification Number (TIN) for the business. Even if a one-person business with no employees or independent contractors this might be advisable. File IRS Form SS-4 which can be accessed at irs.gov and prepare the application online.
12. Licensing with professional board, state or locality as a business if a professional practice or if required. This also applies to one person practices or businesses.
13. Join professional or business associations if applicable
14. Determine how business will be financed, and make arrangements for that financing
15. Project cash flow and cash flow management methods
    1. A good way to start is to project revenues and expenses; called a profit and loss statement (P&L)
    2. Then convert the P&L into elements of cash received and paid out. It is suggested that this be done on a monthly basis (for some business’ weekly might be more appropriate).
    3. Include your initial investment and any amounts borrowed
    4. Make sure the cash never dips below zero for any period. If it does, its over …
    5. This will also tell you the minimum investment needed, and you need to make sure you have this available before you start the business
    6. If you cannot make it come out on paper before you start, how do you think it would be once you are in business
    7. Comment: Annual projections might indicate adequate initial funding, but month by month projections could indicate the lowest point of the initial funding and it if it dips negative then the company would be out of cash. Further, the P&L could indicate huge profits, but there could still be negative cash flow due to inventory purchases, higher than expected accounts receivable or capital costs. Work out the numbers as carefully as you can. You might not get a second chance. I once had a client that invested in businesses that ran out of cash “a week before they started showing positive cash flow.” Do not let this happen to your business.
16. Determine capitalization and loan policies for initial and subsequent investments. If there will be loans, make sure there are notes with interest and due dates stated. Do not get stared without having the notes drawn up with all terms spelled out.
17. Establish owner’s payroll or draw policy. Consider a regular draw from the Company’s bank account. If there will be initial losses and the draw is from your initial investment, make sure you do not set it up so you would be paying taxes on your own money.
18. Solo or with a partner
19. Buy-sell agreement if more than one partner or owner. This is a must have and the easiest and least costly is when you start the business. The costliest is if someone dies or becomes disabled and there is no agreement, or if the business becomes successful and one of the founders wants to leave under unpleasant conditions.
20. Tax elections and policies to be established
    1. Basis of accounting—cash, accrual or other
    2. Inventory method
    3. Fiscal year if applicable
    4. Retirement plans
    5. Hiring minor children of an owner
    6. Hiring relatives of an owner
    7. Organization costs
    8. Prestart costs
    9. Startup costs
    10. Expense reimbursement policy
21. Business plan (and strategic plan)
    1. Identify service niches or specialties, or position in marketplace
    2. Market serviced
    3. Identify how sales will be made
    4. Vision
    5. Mission
    6. Brand
    7. Business philosophy
    8. How products or services will be obtained and delivered
    9. Marketing plan
    10. What is your USP (Unique Selling Proposition)
    11. Equipment needed
    12. Software and IT needed
    13. Any special processes or formulas that will be involved, purchased or developed
    14. A thorough business plan should be prepared
    15. If the business plan is carried forward at least three years past the startup and negative cash flow period, it becomes a strategic plan
22. You will need to get all sorts of office and mailing supplies and equipment (such as desks, chairs, filing cabinets and bookcases). Do not skip ordering a coffee machine and small refrigerator for water and sodas. Also decide if you will print letterhead or have the letterhead embedded into your computer for letters and invoices.
23. Open express courier accounts and find out pick up or drop off schedules. While at this find out the latest drop off time at the local post office. Following this schedule could save having to use a courier service.
24. If you will have customers come to your office or showroom, consider plants or having fresh flowers delivered weekly
25. Technology hardware, equipment and technical and specialized software that would be needed in your business and software that is specific for your industry. This should include a scanner/copier and do not overlook copy paper.
26. Cloud, paperless strategies, workflow and document management systems
27. Need secure portal availability
28. Protect your business and yourself from cybercrimes, from your systems or video meetings being hacked
29. Obtain accounting software for internal bookkeeping and accounting
    1. Establish billing and invoicing methods and payment terms
    2. Establish policies for paying vendors
    3. Determine if payroll will be done inhouse or with an outside service bureau (see next item)
    4. Administrative software such as mailing list and customer relationship system, calendar and scheduling software
30. Decide if you will outsource payroll preparation and tax filings, use a professional employer organization (PEO) or do it inhouse. If inhouse, identify the person or position that would do that job.
31. Decide if you will outsource human resource administration
32. Decide if you will outsource all bookkeeping and accounting functions or if it will be done in house and require hiring a bookkeeper, either part or full time or virtual
33. Define and develop mobile strategies
34. Identify personnel levels and admin support
35. Use of permanent or part time staff, consultants, or outsourcing partners
36. Consider using a virtual assistant and appointment scheduling
37. Arrange for phone call voice mail messages
38. If using independent contractors, fill out IRS Questionnaire Form SS-8 and obtain Form W-9 from the independent contractor. If status is questionable have an attorney prepare an independent contractor agreement for them to sign.
39. Employment agreements if necessary for your type of business
    1. For all employees
    2. For executive and managerial employees
    3. Confidentiality agreements
    4. Non-compete agreements
    5. Employee handbook
    6. Employment fact sheet given to employees
40. Staff or personnel scheduling, dispatching or work assignment and oversight or review methods
41. If there is more than one owner, what functions and work each will do and be responsible for
42. Determine necessity of getting proforma contracts to use with customers
43. Get a Logo
44. Get a Website
45. Email addresses and a company URL rather than a generic URL such as gmail or AOL
46. If there will be patents, trademarks, copyrights or other intellectual property determine who will own them—the business or individuals
47. If there will be patents, trademarks, copyrights or other intellectual property (IP) it is strongly suggested an IP attorney be consulted regarding appropriate protection of origin and ownership of such intangibles, and the type of entity that should be organized for such protection. An accountant should also be consulted on the way to arrange for taxability should the IP is sold rather than used in the business.
48. Open a bank account. You might want an operating bank account and a separate account for payroll.
49. For bank account, determine who will be signatories and whether more than one signature will be required
50. Determine if you want a post office box, UPS Office (or similar) box or mail to be delivered to your office
51. Office equipment, filing, telephone, postage meter, courier accounts, stationery
52. Communications methods
53. Insurance – umbrella, workers’ compensation, general, product and malpractice liability, general office, cybertheft or hacking, statutory employee disability insurance
54. Medical insurance
55. Life insurance on owners
56. Disability income insurance on owners
57. Disability buy-out insurance if more than one owner
58. Pension or retirement plan contribution policy
59. Owners’ meetings frequency, location and length
60. Determine if you will assemble an advisory board
61. If a single owner business, have a contingency or business continuation plan in event of a temporary or permanent disability or premature death
62. Owners’ retreat
63. Document all important decisions with memos or minutes of meetings
64. Owners’ compensation and profit division policy
65. Owner benefits policy such as vacations and time off
66. Determine sustainability, corporate social responsibility (CSR) or environmental, social and governance (ESG) policy … and attitude toward these issues
67. Publicity, marketing, advertising, and sales promotional activities. Include the opening announcements. If you will have an office, try to get the mayor to cut the ribbon.
68. Social media strategies, and establishing accounts
69. Networking methods
70. Referral sources
71. Mailing list—establishing and maintenance
72. Engaging a mailing service
73. Announcements of new firm or business
74. How will you create excitement?
75. Exit strategy (already? “Didn’t I just get started?”)

Conclusion

Checklists are always helpful and create road maps of what could or should be done. Starting a business is a tremendous undertaking, and most budding entrepreneurs tend to concentrate on the big issues of whether they will be successful with their products or services, get customers, price it right and generate profits. However, as this list shows, there are many other details that need taking care of, some of which can be harmful if they are neglected. It is much easier to advise clients beforehand on what they need to consider than trying to fix the omissions in the heat of the battle of running the business. Use this list as a guide and add to it, or take away, anything that will be helpful to a successful start.

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Edward Mendlowitz, CPA, PFS, ABV, CFF, is emeritus partner with WithumSmith+Brown, PC, in East Brunswick, New Jersey. He has over 40 years of public accounting experience, is a licensed Certified Public Accountant in the states of New Jersey and New York and is one of Accounting Today’s 100 Most Influential People. The author of 30 books, Mr. Mendlowitz has written hundreds of articles for business and professional journals and newsletters and presented over 350 CPE programs. He writes a weekly blog at www.withum.com/partners-network-blog.

Mr. Mendlowitz can be contacted at (732) 743-4582 or by e-mail to emendlowitz@withum.com.