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Food For Thought
The information on this page has been designed to give you insights on things you may need to reflect on before and after you implement your business.
Before you use it, be sure to test them for relevance to your business development needs.
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Before you start your new business, it is important for you to do some preliminary planning. This would enable you to reflect on what you are about to undertake, the type of business you intend to build and other important issues. Here is a checklist of things that you may want to examine during this important reflective and start up phase. Whether you are a for profit or non profit business, this information should work for you.
1. Determine the purpose and the structure of the business you want to implement. Hold initial planning (possibly informal) meetings to establish consensus with your collaborators, if any, on the type of entity you will implement, the purposes for which you are forming the entity and the manner in which you are going to approach its implementation. If you are doing the business with others, delegate responsibilities for:
1. Cost of Incorporation
2. writing of business plan
3. Other necessary pre-startup costs
4. Consulting fee for advice on the startup and future
dimensions of the business
2. Form a preliminary or ad-hoc executive board and a board of directors for the entity. Let this Board authorize and accept the articles of incorporation and file for same, authorize the filing of tax-exemption application, all initial start up financial transactions, Where the entity you are setting up is a non profit entity, a formal board of directors is required for incorporation and is desired by those considering initial funding proposals.
3. File articles of incorporation, partnership or other type of business you intend to implement. Where you are a non profit organization, most funding sources, because they may wish to claim the donations that they make to the entity as deductions on their federal and state income tax returns, deal only with organizations that are incorporated as nonprofits.
4. Draft bylaws.
Since these make up the “rulebook, guidelines’’ for running an organization, it is helpful to draft them during the early stages of the entity’s development. Moreover, bylaws must accompany the organization’s application for tax exemption. With respect to non profit organizations, bylaws should be drawn up to show the rules and regulations by which the organization and its members would be governed. For more on bylaws, see our tips on the dynamics of these elements in our business tips section.
5. Initial Planning for your business: Determine the preliminary cost of implementing your business. The initial planning of an entity could contain hidden costs that you need to consider. Some of these are:
The 501 (C) (3): In the US, if you are a non profit organization, File form 1023 application with the Internal revenue Service to obtain 501(c)(3) tax exemption from corporate income taxes. This frees donors from having to pay taxes on funds donated to the organization and, in essence, makes it “fundable.”
File charitable trust registration with the state.
Apply for necessary permits such as authority to collect sales taxes and other permits and licenses that are necessary to operate the entity, from the national government or your local authorities, in accordance with the type of business you are operating. Check with local regulatory offices such as education department, department of l licenses of the municipality t in which the organization is doing business whether a license is necessary.
Bookkeeping or Accounting: Establish a relevant bookkeeping or accounting system. When you get together up to the first few months of operation, only a simple system may be needed until the organization begins to develop its activities on a large scale. However, you should, in anticipation of the organization’s financial recordkeeping needs at later stages of its operations, develop an accounting system with which the entity could address such needs.
Procurement: Government spend most of their budgets purchasing goods and services. Most importantly:
Monitor the appropriate authorities about if or when you need to file appropriate documents such as IRS yearly taxes, sales taxes, payroll and other necessary statutory forms with the authorities.
Decide about Social Security contributions. If the decisions are yes, notify the Social Security office, since all 501(c) (3) organizations are automatically exempt. Remember, even though you may be exempt from paying taxes, you may need to file reports with statutory authorities. Check this out whit them.
If you are a non profit entity, upon receipt of federal exemption, check with the state to see if you need to secure state income tax exemptions.
Apply for state sales tax exemption. The organization will receive a certificate of exempt status with its sales-tax exemption number. If you are going to sell things to the public, apply for a resale certificate from the state so that you are not charged taxes on purchases that you will resell to the public, especially from wholesalers.
After you begin to operate, Register with state unemployment insurance program. This is done through the state department of employment. Also, apply for State workmen’s Compensation and disability programs for your employees.
Apply for necessary property tax exemption, if appropriate, with local tax assessor’s office.
Set up employee benefit plans
Obtain liability insurances. Such insurances covers the organization property and its products, and insures the organizations against personal injury suits by clients and guests.
If you are going to use the mail a lot, apply for nonprofit bulk mail prevent from post office. Such a permit is beneficial if the organization plans mailings of over 200 pieces of material.
Develop personnel policies. This should be done even before you begin to operate in full, or within the first year of operation.
Get the company moving. Relevant Staff must be hired, space rented, and program activities started. The board of directors, by declaration, must determine when the business actually begins.
James Management Consulting, Inc. is a business consulting and accounting firm.
We do NOT provide legal advice. For a list of the business services we offer, CLICK HERE.