I am often asked, “How hard is it to start a new business … non-profit”? I tell them, “It’s not hard; but there are a number of basic tasks to accomplish”. At some point, a bank, a client, your accountant is going to ask for one or more of the following items. It only makes sense that if you are going to prepare one of these items, then you might as well prepare all of them, at the same time, right from the beginning.
Before we start with the 10-Steps to Create a Business or Non-Profit, let me first explain the benefits of creating a Mastermind Alliance and what it is. A Mastermind Alliance is Principle 2 of Napoleon Hill’s Secrets to Success outlined in his 1937 book Think and Grow Rich. A Mastermind Alliance involves two or more people who work in perfect harmony for the attainment of a definite purpose. For the purposes of starting your business, consider the Mastermind Alliance your advisory board. Some of the members may serve on your board of directors. In forming your alliance, or advisory board, I recommend starting small, one to three others in addition to you. Pick individuals for which you trust their opinion, will look out for your best interest, and have skill sets you can use in the early stage of your business formation; i.e., accountants, lawyers, developers, engineers, whatever “fits” well with your business idea. When you form the alliance, you are the leader, you set the agenda and meeting times, and you begin by establishing the definite purpose for the group and the reason to meet. These individuals are volunteers to start, but may become future investors. To keep their interest early on, at least start by buying their meals or coffee.
The 10-Steps below to create your new business assumes you already have a name for your new business. The business name can either be your professional name, like a law firm, or Mom’s Best Ice Cream, or if the name you desire to use is already taken, or you are operating a franchise like Subway, you will create your business name and file under what is called a DBA, or “doing business as”. This means that the trade name or fictitious business name you use for marketing, signage, and the name your customers know you by, is not the legal name of the business. Your Subway franchise is known as Subway to your customers, but obviously you can’t start a new business using that name. So, you create a name you like. Jim’s Restaurants LLC “doing business as” (DBA) Subway No. 258. A great source of more detailed information on starting a business can be found at the US Small Business Administration (SBA) at: https://www.sba.gov/starting-managing-business.
Here are the 10-Steps to create your new business:
1. The first thing to do is to create a Vision Statement and a Mission Statement. Use your alliance to help with this. The vision should be expressed in no more than 4-6 sentences that describe the future results of the business or non-profit; consider these thoughts: define where you are going, the future state of what you want to achieve over time; define what it will look like when you get there; create a way to evaluate achievement. Create a Mission Statement. It too should be no more than 4-6 sentences that define the present state or purpose of the business; addresses what it does; who it does it for, and; how it does what it does. It describes the action needed to get to your vision. Your alliance will help you with this too.
2. Choose your Business Structure. This is the legal, and tax, structure of your business. It can be either a Sole Proprietorship; a Limited Liability Corporation; a Cooperative; a Corporation; a Partnership; a S Corporation, or; a Non-Profit. Refer to the SBA web site referenced above or the IRS at: http://www.irs.gov/, and use the search.
3. Obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS), you can do this on-line at: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-%28EIN%29-Online.
4. Once you have your EIN, fill out an IRS W-9 Form using your company name and EIN number and file it away. This form is your Request for Taxpayer Identification Number and Certification Form. Your clients will request this form when you submit you first invoice. You will likewise want to request a similar form from vendors you pay. See Link: https://www.irs.gov/pub/irs-pdf/fw9.pdf.
5. Form an Incorporating Board; this does not need to be your final working board of directors. Most incorporating boards aren’t. You and two friends, family members or members of your mastermind alliance will do.
6. Create Articles of Incorporation, and have the Incorporating Board adopt them. File the Articles with your State and Local governments as required. The articles must state your purpose. Most governments have on-line forms you can complete and ways to upload your document. A Google search will yield lots of samples. Use the one page samples you find.
7. Use your EIN and Articles of Incorporation to open a Company Checking Account. Never use your personal account. Doing that becomes an accounting and tax nightmare real quick.
8. Obtain an Occupational or Business License from your State and/or Local government as required.
9. In your first Board meeting, also have the Board adopt By-Laws and a Conflict of Interest Statements. Samples of these are also all over the Internet. If you are a Non-Profit, prepare and file with the IRS Form 1023, Application for tax-exempt status. https://www.irs.gov/uac/about-form-1023. Don’t receive tax-exempt donations until the IRS approves. If you are a retailer or other business subject to sales tax collections, get registered with the State and/or Local governments that oversee the collection and distribution of sales tax collections. You will have to file quarterly sales tax collections.
10. Establish your bookkeeping methods, set-up a chart of accounts, and create your company in accounting software. Prepare a budget and 24 month cash flow projections.