At one time or another, most people have dreamed of being their own boss, running their own business. Connecticut has been a hotbed of that kind of thinking; Sam Colt and his revolver, Eli Whitney and his cotton gin, Igor Sikorsky and Charles Kaman and their helicopters, even Louis’ Lunch and the hamburger.
Given the uncertainties of today’s economy, there might even be more people thinking of striking out on their own but wondering if they can, or should, do it. And, given the current financial crisis that has hit many people so hard, others may be hesitant to make such a move right now.
Any start-up business is a risky endeavor. But, with proper planning, risk can be minimized. Some businesses can be operated from home. A service business can be capitalized with less money as there is no need to invest in inventory. Delivery services require no fixed rent and utilities to pay, although the cost of fuel and a vehicle are significant factors.
Connecticut is a highly regulated state. It might seem that you need an army of lawyers, accountants and consultants. Does this mean that ordinary citizens cannot start a new business without submitting to a complex and costly bureaucratic process?
Happily, the answer is no.
Unless a business license, permit, or some sort of regulatory approval is required (for example, a beautician, a plumber, a stockbroker, or a liquor store owner) and/or multiple investors are involved, most people can start a small business by simply following the following steps:
1. Select a name. You can use your own name or a trade name. If the name is fictitious (i.e., Cut and Trim Landscaping), you must file a trade name certificate in the town in which you conduct business. The fee is as little as $5.
2. Apply for a Sales Tax identification number from the Department of Revenue Services. Telephone number (860) 297-5962.
3. If you are sole proprietor, you can use your social security number. You will need to file a Schedule C with your 1040 Income Tax Return.
4. If you decide to form a single member limited liability company (“LLC”), you can go online to www.sots.ct.gov and download the form entitled Articles of Organization. It is a one page document that is easy to complete. The filing fee is $60. If you are a single member LLC with no employees, you do not need a Federal Tax Identification number. Otherwise, you do. Go on line to www.irs.gov and download the application for a Federal Tax I.D. number. There are instructions available to help you prepare the application.
5. Buy some business cards and letterhead or, if you know how, print your own on your computer.
6. If you plan to work from home, check with the Town Planner in your town to make sure you are in compliance. For example, unless your residence is in the proper zone, you will not be able to operate a retail business from your home.
7. If you expect to operate from a store, office or industrial facility, you should have legal assistance, unless you can rent month to month or can negotiate a short term lease.
8. You should contact an insurance agent to obtain liability and comprehensive insurance, and, if you have employees, worker’s compensation insurance. There are other coverages available, such as products liability and business interruption, so check with your agent.
9. You should arrange to have sufficient operating capital to pay for three to six months of operating expenses until you can break even or start making profits. Some businesses require additional operating capital.
These general guidelines should be more than enough to get anyone started and on their way towards that goal of owning and operating a small business. Oftentimes in these ventures, the biggest stumbling block comes in worrying if such an idea is simply too difficult and too large for one person to pursue. With these helpful hints, though, hopefully it can be made clear to anyone that the dream of being your own boss may be closer than you think.
For more information, please contact Attorney David A. Baram.