According to the U.S. Small Business Administration, 600,000+ new businesses open annually across America, and the year 2020, which brought us COVID-19, was no exception. Even as the pandemic spread and many small businesses across the country began to lay off workers and/or close their doors altogether, a record number of brand new businesses were opening up.
While at first glance, launching a new business in the midst of a pandemic seems counter intuitive, it actually makes perfect sense. Numerous studies have shown that the majority of people who open their own businesses don’t do it for money; they do it for control. They want to be their own boss. And what better time than in the midst of a worldwide health crisis to take charge of your destiny?
With that in mind, here are eight essential steps to help you get started in a business of your own.
1 - Choose a structure
Four options are available to you: sole proprietorship, partnership, corporation or limited liability. Selecting the right structure depends on the type of business you envision and whether you intend to have employees or go it alone. See dba Florida™ for descriptions of each.
2 - Choose a name
What will you call your business? The most obvious choice is your own name. But you might also consider keywords that relate to what you do or where you are located. Look to pop culture and to friends for ideas too, keeping in mind that the best names are:
- Concise – fewer than 10 letters for easy recall, log-ins and tweets;
- Flexible – in case you expand to new product lines or locations later on; and
- Original – search uspto.gov or trademarkia.com to be sure no one else is already using the name you’ve chosen.
And don’t forget: If you plan to conduct business under a name other than your own, you must file a Fictitious Name registration application with the Florida Department of State, Division of Corporations. See dba Florida™ for details.
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3 - Choose a location
Selecting the right site for your business is every bit as important as deciding on its name. As you explore the possibilities and narrow your choices, ask yourself:
Is the area zoned for my type of business?
Will I feel safe in this neighborhood?
Can I afford the monthly rent?
Is this site occupant-ready or will renovations be needed?
Are surrounding businesses complementary or competing?
Is there a readily available labor pool I can draw from?
4 - Apply for an Employer Identification Number (EIN)
To pay federal, state and local taxes, you must have an official federal ID number. If you are operating as a sole proprietor with no employees, your Social Security number is sufficient; otherwise, you will need an Employee Identification Number (EIN). It’s free at irs.gov/businesses/.
5 - Know what taxes you’ll need to pay in taxes
Anyone who launches a business should expect, at the very least, to pay federal income tax on their earnings. But depending on your business type, size and personnel, you also may be subject to various state levies, including reemployment tax, sales and use tax and tangible personal property tax.
FLORIDA TAXES
Corporate Income Tax
• Corporations are subject to a 5.5% corporate income tax and must file a return annually even if no tax is due. C-corporations pay the tax on Form F-1120. If your corporation owes more than $2,500 annually in Florida corporate tax, you must make quarterly estimated tax payments.
• Limited Liability Companies classified as corporations for federal income tax purposes must file a Florida corporate income tax return; limited liability companies classified as partnerships must file a Florida Partnership Information Return (Form F-1065) if they are doing business in Florida and one or more of their owners are a corporation. Also required to file: the corporate owner of an LLC that is classified as a partnership for Florida and federal income tax purposes.
• S-Corporations usually do not have to file a Florida corporate income tax return unless there is federal taxable income.
Due: April 30, July 31, Oct. 31, Jan. 31
• Reemployment Tax Required of Floridians who paid at least $1,500 in wages within a calendar quarter, have employed one person for any portion of a day in 20 different weeks during the calendar year or are liable for federal unemployment tax.
Due: April 30, July 31, Oct. 31, Jan. 31
• Sales and Use Tax Businesses engaged in taxable transactions must register online or by mail with the Florida Department of Revenue using Form DR-1 (Florida Business Tax Application). Taxes may be filed electronically or, if less than $20,000 per year, on Form DR-15. Businesses having $1,000 or less per year to report may file quarterly; $500 or less, semiannually; $100 or less, annually.
Note: Florida imposes a statewide general sales tax rate of 6%. However, individual counties may impose an additional tax of up to 2.5% on transactions that are subject to state sales and use tax; report this surtax on Form DR-15 along with sales and use tax.
• Use Tax on Out-of-State Purchases When out-of-state sellers fail to collect Florida sales tax, buyers must make the payment on their own using Form DR-15MO. Applies to items purchased out of state from internet sites, mail order catalogs, auctions, shopping networks or toll-free shopping services, and to items physically purchased out of state when the merchandise is shipped to a Florida address.
Due: First day of the month after the quarter in which the purchase was made
• Tangible Personal Property Tax An annual tax on personal property used for commercial purposes that is not included in the assessed value of the real property, excluding business inventory and state-registered vehicles; paid on Form DR-405 to the county property appraiser. All new businesses must file their first year; no additional filing is required if the amount of tangible property is less than $25,000.
Due: April 1
FEDERAL TAXES
• Personal Income Tax For sole proprietorships and partnerships, profits and losses from the business are typically passed through to the owners and reported on their individual income tax returns. Under the Tax Cuts and Jobs Act passed in December 2017, some small business owners may also qualify for a 20% pass-through deduction, which is currently scheduled to last through 2025. For more detailed information, consult a tax professional.
Due: April 15 / Quarterly estimates due: April 15, June 15, Sept. 15, Jan. 15
• Self-Employment Tax All net profits derived from doing business as either a sole proprietorship or partnership with no employees are subject to federal self-employment tax, which is equivalent to the Medicare and Social Security taxes employers withhold from their employees’ paychecks.
Due: April 15
6 - Secure the necessary permits and licenses
Unless you are working from home as a sole proprietor with no employees, you will likely need one or more of the following to legally open and operate your business:
- Zoning Permit Must be obtained before receiving a business tax receipt. If you are within city limits, apply at the city zoning department; outside city limits, apply at the county zoning department. Note: Some jurisdictions require both city and county permits.
- Business Tax Receipt (aka Occupational License) If your business is within city limits, and the city and county issue separate business tax receipts, contact your municipal and county government offices to determine if you need just one or both.
- State and Professional Business Licenses More than 300 job categories/professions require a license from either the Florida Department of Business and Professional Regulation or the Florida Department of Agriculture and Consumer Services. Health-related professions/businesses are licensed and regulated by the Florida Department of Health. Costs vary and applicants must meet established criteria.
- Health Permits and Licenses Required for public lodging and public food service businesses; available from the Florida Division of Hotels and Restaurants. Licenses for retail food stores, food processing plants and food storage/distribution businesses may be obtained from the Florida Department of Agriculture and Consumer Affairs.
- Beverage Licenses Businesses that sell alcoholic beverages must apply for a beverage license through the Florida Department of Business and Professional Regulation; fees depend on types of beverages sold or served. Retailers and wholesalers of beer, wine or liquor must pay federal occupational tax and obtain a control number from the U.S. Department of the Treasury.
- Retail Establishment Licenses Required by the Florida Office of Financial Regulation for any business financing the sale of goods or services sold by installment contract or revolving charge account to a retail buyer. Also subject to licensing: collection agencies, consumer finance companies, mortgage brokers, securities dealers, investment advisors, mortgage business schools.
- Environmental Permits Required for any business that is an actual or potential polluting source; one-time construction permits and renewable operating permits are also required. Permitting is mandated for such activities as dredge and fill, storm water construction, water treatment and sewage treatment. Apply through the Florida Department of Environmental Protection.
For more detailed information about permits and licenses pertaining to your specific business, visit myflorida.com/dbpr and sunbiz.org.
7 - Expand your knowledge of labor law
You don’t have to be an expert in labor law to run a business, but it helps to have at least a working knowledge of federal and state requirements with regard to employee health, wages, safety and fair treatment.
FEDERAL LABOR LAWS
- Federal Minimum Wage Requires employers nationwide to pay a minimum wage of $7.25 per hour and overtime pay of not less than one-and-one-half times the regular pay rate after 40 hours of work per week. (dol.gov)
- Occupational Safety and Health Act Requires businesses to protect their workers from health and safety hazards on the job. (osha.gov)
- The Americans with Disabilities Act Prohibits employment discrimination against qualified individuals with disabilities; requires public accommodations and commercial facilities to comply with specified accessibility standards. (ada.gov)
- Family and Medical Leave Requires businesses employing 50 or more to give certain employees up to 12 weeks of unpaid, job-protected leave per year (26 weeks for qualifying military caregivers) while preserving their health benefits. (dol.gov/whd/fmla)
- Equal Pay Act Prohibits wage discrimination between men and women performing substantially equal work within the same workplace. (eeoc.gov)
STATE LABOR LAWS
- Florida Minimum Wage Requires employers in Florida to pay a minimum wage of $8.65 per hour and, for tipped employees, a minimum wage is $5.63 per hour.
- Background Checks Private citizens or companies may request a state-only criminal history record check of an individual through the Florida Department of Law Enforcement website for a fee of $24 per case.
- Workers’ Compensation Requires employers with four or more employees (full- or part-time) to carry workers’ compensation coverage for their employees; different requirements apply for construction and agriculture. (myfloridacfo.com/division/wc)
- Child LaborWorkers under age 18 cannot work in certain hazardous occupations, including excavation, electrical work, roofing and mining, or around explosives, toxic or radioactive substances or dangerous equipment. Additional occupations are banned for children ages 14-15. Minors cannot work during school hours without an exemption.
(myflorida.com/DBPR/child-labor)
Put Your Best Foot Forward
- Package your plan in a loose-leaf binder. It’s easy to make revisions as conditions change.
- Be thorough but concise. Tell your story with hard facts, avoid fluff.
- Do your homework. Identify your target market and address potential obstacles up front.
- Tout your strengths with concrete evidence. Quantify your statements with facts. For example, say: “By pricing my product 20% below XYZ, costs will be recouped within six months.”
- Make it personal. Introduce your management team and stress the specific talents each brings.
8 - Commit your plans to paper
Big dreams have launched many a new business, but they won’t sustain one. To ensure that you start off right and carry your vision through to completion, you will need to prepare a business plan — in writing. Committing your plans to paper may seem like busy work. To potential investors, however, the extra effort you put in to crafting a workable business plan may be just the proof they need to consider you and your business worthy of their financial support.
An effective business plan describes: (1) the nature of your business; (2) how you intend to achieve specific goals for your business; and (3) the profits you expect to gain as a result.
And since all business plans typically consist of the same eight to 10 specific elements, putting one together is a straightforward process.
Why you need a business plan
The process of writing a plan forces you to think about every aspect of your business and devise solutions to potential problems.
No potential investor — and that includes financial institutions — will take you or your business seriously without one.
What to include in your business plan:
- Executive Summary
Highlight the key strengths of your plan, including where you want to take your company and why your idea will be successful. - Company Description
Make this your extended “elevator pitch” to help readers, especially potential investors, quickly grasp the uniqueness of your business. - Market Analysis
Demonstrate that you understand your industry, target market, customers, competitors and pricing structure. - Organization and Management
Describe your company’s organizational structure; introduce the principals and management team. - Service or Product Line
Emphasize the benefits you can provide to current and potential customers. - Marketing and Sales
Explain how you plan to promote your product or service, create customers and boost sales. - Funding Requests
Lay out current and future funding requirements; tell how you will use any funds you may receive and the types of funding you prefer. - Financial Projections
Summarize projected income and expenses, past credit history, intended allocation of resources and other financial details. - Appendix
Provide supporting information and documents, such as: your credit history; letters of reference; resumes of key managers; leases; licenses, permits and/or patents; a list of your business consultants (attorney, accountant, etc.); relevant research, magazine articles or book references.