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How To Set Up A Small Business

The income from a small business can ease the strain on the household budget, even if it brings in only a few hundred dollars a month. After you've decided on what type of business you'll establish, tackle a few decisions that need to be addressed. Get the business started right and you won't have to worry about the details later.


Your business needs to have a legal structure depending on what works best for your situation. A sole proprietorship is the simplest structure for a business. The downside is that the owner, that's you, is personally held liable for any debts of the business. Your assets are at risk if the business is involved in litigation. (reference 1) A corporation is considered a separate entity in the eyes of the law and the Internal Revenue Service for taxes. The corporation may be an S corp, C corp or a Limited Liability Corporation, LLC.


Most cities and states require that a business be licenses. Even if all you do is blog and earn a few dollars from advertising revenues, the business needs to be licensed and that requires a fee. Other licensing may include a sales license to collect sales tax. Certain occupations require their own licensing such as catering, cosmetology and real estate sales. Check with your state's business development office to see the specific licensing requirements.

Place of Business Even a small business requires a home, and that home may be in your house. Check your zoning and home owners covenants to see what restrictions there are for home businesses. If you won't have clients or customers coming to your home, there may not be any problems. Consider an executive suite which provides a small office that's just yours and shared receptionist services for greeting customers, receiving mail and handling phone calls.

Equipment If you already have a computer, phone, Internet access and software, you may be ready to get your small business going. Consider whether you want to set up a separate business line. Check with the phone company whether there are additional charges for a "business" line which is listed in the phone book under the business's name. If most of your business is conducted online, rather than by phone, a "business" line, rather than an additional residential line, may not be necessary.

Bank Accounts and Payment Methods

Keeping your personal money separate from the funds generated by and used for the business will make tax time less stressful for you. Keep the records as you go and you won't face an overwhelming task at the end of the year. Set up a way to take credit cards, even if it's an online third party processor rather than your own merchant account.

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