Paperwork Required For Small Business Setup

Opening a small business takes many hours of preparation and planning. Deciding on a name, finding a location and purchasing equipment are only some of the steps that take place. Time-consuming paperwork like getting professional licenses and permits in order, acquiring e & o insurance, and registering with the state and the IRS must also be completed before the doors open.

Many professions require specific licensure and permits. The requirements vary from state to state, so it is important to call local officials or visit the state’s website to make sure you get all the necessary paperwork in order. Some states require every small business to purchase a permit, while others only require them for specific businesses like those involved in automotive sales, liquor sales or food preparation and sales. Most licenses do not carry over state lines, which is why many professionals hold multiple licenses for each state they practice or work in.

Acquiring errors and omissions insurance, more commonly referred to as e & o or liability insurance, is essential for small businesses in professional service industries. This insurance protects a business or individual from repercussions such as lawsuits that may arise from mistakes that can be made in busy, high-paced industries. Real estate firms, property management companies, insurance brokers and agents, accountants, and medical groups all benefit from this type of insurance. Not all states require errors and omissions insurance, but it is very risky for a business to operate without it.

Businesses that are operating as a corporation, partnership or single member limited liability need to apply to the Internal Revenue Service for an Employer Identification Number, or EIN. This number is used for taxation purposes and is necessary whether the small business has any employees or not. If the business does have employees, it is also mandatory to register as an employer with the state. The state will issue a separate and distinct employer number and provide the appropriate steps to report the necessary employee information to the proper state department. Another way to protect the business is by registering the name of the business. Registering the business name is not mandatory in all states, but the fee for registering is usually nominal and it ensures no two businesses operate with names that are identical or markedly similar.

Starting a small business is both exciting and frightening, but with the proper preparation many problems can be resolved before they surface. Although paperwork can be monotonous and boring, it is an important element to any small business startup. Getting permits and licenses in order, securing e & o insurance, and registering with the appropriate state and federal government before servicing customers and clients is the legal, ethical and moral thing to do.





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