Starting a Small Business

There are several key steps to take in starting your own small business - many of which have legal consequences. Here is a summary.

  • Choosing a Business Entity. Typically, you'll select one of four entities for your business: a sole proprietorship, a partnership, a corporation, or a limited liability company (LLC). With a sole proprietorship or partnership, you're personally liable for all business debts. With a corporation or LLC, your personal liability is limited. Depending on the type of business risks you anticipate, a corporation or LLC may be the preferred entity.
  • Filing the Start-Up Documents. The type of entity you choose will determine the documents that you must file with the state or county government. If you have a sole proprietorship and are using a business name other than your own, you should file a Certificate of Assumed Name with the Washtenaw County Clerk. If you have a partnership, you should file a Certificate of Co-Partnership with the County Clerk. Other business entities must file start-up documents with the Michigan Department of Energy, Labor & Economic Growth: Articles of Incorporation for a corporation, or Articles of Organization for an LLC.
  • Obtaining Necessary Licenses and Permits. Only a small number of businesses - such as a restaurant - need a license or permit from the state or local authorities. If yours is one that does, you'll need to apply early on to avoid possible delays.
  • Getting a Tax ID Number. You need to get a tax number from the IRS by filing Form SS-4. You can learn more at the official site:
  • Buying Insurance. You'll want to get property insurance to reimburse you if your business property is damaged or destroyed. You'll also want liability insurance to protect you if someone is injured through your business operations. And a business with employees needs workers' compensation insurance.
  • Doing Business at Home. If you have a home-based business, check to see that you won't be violating the local zoning ordinance, or any covenants, conditions and restrictions that affect your property. Also, talk to your insurance agent: you may need a business rider to your homeowner's insurance policy.
  • Understanding Your Commercial Lease. Before signing a lease for business space, read the terms carefully. Make sure you're clear on the extent of the financial obligations. Your business may be responsible for charges beyond the basic rent - for example, for maintenance costs and property taxes.

The attorneys at the Ann Arbor firm of Hamilton, London, & Davis can guide you through all phases of the start-up process.

Categories: Business Law