Are you employed full time but dream about starting your own business? No problem! We developed the “16 Steps to Starting a Business While Working Full Time” eBook to guide budding entrepreneurs by managing tasks step by step.
In step 8, we will cover business licenses, taxes and insurance.
If you need a refresher of the seven previous steps, here they are: select a business, create a business plan, establish goals, choose your marketing methods, figure out your finances, know the rules and how to set up your office.
Most startups begin as either sole proprietorships or partnerships. But learning about other business structures can help when deciding to grow. The options are C corporation, S corporation and limited liability company (LLC). With these structures, the business is a separate legal entity independent of you or your partners. You receive tax and liability advantages that can protect your personal assets.
Business Licenses and Permits
Sole proprietors and partners must register for a business license in their county. LLC’s and corporations need to register for a business license in their state. Registration fees are usually less than $200 plus annual renewal fees. Depending on your industry, you may also need state, county and/or municipal licenses. Your state, city and county websites will give more information for your type of business.
Fortunately, you can deduct some startup costs on your taxes. To qualify for a home-office deduction, your home must be your principal place of business AND the part of the home you deduct must be used exclusively for business. The IRS lists their guidelines to determine your eligibility.
Other deductible expenses include but are not limited to:
- Business equipment and furnishings
- Office supplies
- Mileage traveled for business purposes
- Health insurance
Learn more on IRS.gov for your business structure. Keep detailed records to make accounting and tax time easier.
You may think that since your business is in your home, your homeowner’s or renter’s insurance covers your startup—but they don’t cover business equipment or furniture. You can add a rider onto your homeowner’s coverage, but you will need extra protection if you store inventory or have customers visit your home office. Property coverage and general liability coverage protect you against loss, damage and lawsuits if anyone is injured on your premises.
You may need extra protection depending on your business. If you provide professional services such as accounting or consulting, you may need errors and omissions (E&O) insurance. This covers claims by clients who are harmed by your errors or negligence.
These requirements may seem overwhelming, but remember that help is around the corner. Connect with a free business mentor at SCORE, and read the remaining steps to entrepreneurship in the “16 Steps to Starting a Business While Working Full Time” guide. Good luck with your journey, and take it one step at a time.