The beginning of each year always sees an increase in the number of startups and small businesses popping up in Madison as well as the rest of the country. For many, the first few months of the year seem like an opportunity to do something new and exciting by putting your business plan to work.
If you’re a newcomer to the Madison small business or startup scene, it’s important you’re not going headfirst into the unknown during the rest of your first year and beyond. While a single checklist is surely not the only kind of business assessment you should be engaging with to make sure you’ve got the bases covered, the following tips should be helpful for those who are starting a business for the first time.
1. Select a Business Structure You’re Confident Will Work For You
For the vast majority of new small business owners going it alone, you’ll automatically be establishing your businesses as a sole proprietor. For many, this model is the best way to go, but it’s important to give this stage very careful thought as not all businesses are recommended to go down that route.
While sole proprietorship is often the simplest way to build your idea, it doesn’t separate the owner from the business itself, putting you, the owner at personal risk if you’re unable to pay your bills or another company takes legal action against you.
Those who want to separate themselves from the business can create a formal business structure with the state. For small businesses and startups in Wisconsin, these tend to be Limited Liability Companies (LLC), or traditional corporations (S or C). This process requires some research on your part to ensure you’re lined up with something that fits your financial situation.
Typically, LLC’s tend to attract those who want protection from liability but don’t want to get entangled with heavy administrative tasks and regular paperwork. Corporations tend to be better for companies with significant investment working behind them who plan to go public at some point.
2. Apply for a Federal Tax Identification Number or Employer Identification Number
If you’re wondering how the IRS keeps tabs on your company’s financial transactions, the process isn’t too different from a personal social security number. Instead, you’ll be issued a Tax ID number––a requirement for LLC’s and corporations. If you plan on opening a separate bank account for your business, you’ll need to submit this number directly to the bank..
While sole proprietors in Madison aren’t required to receive a Tax ID number, it’s advisable they do––if nothing else, it will save you from having to give out a personal social security number to each client or vendor you’re working with.
Want to apply? Click here.
3. Get a firm understanding of Wisconsin’s Employer Laws
If you’re planning to bring on a team of employees, it’s absolutely essential to understand your legal requirements as an employer. Payroll obligations, and tax withholdings, unemployment, and wage requirements are just a few of the areas you need to become well versed in to protect yourself from problems later.
If it’s your first time going through the hiring process, it’s a good idea to get in touch with an employment law professional so you don’t miss anything during business development.
If this year seems like the best time to launch your startup or small business in Madison, Wisconsin, do your very best to not let the excitement and new experiences of ownership prevent you from building a financial and legal foundation that can support your growth in the future.
If you’re a new business owner in Madison, WI and need assistance establishing a reliable bookkeeping system for your organization, give us a call. Our outsourced accounting and CFO services experts can help you navigate these waters.
Photo credit: Daniel Kulinski