According to the Small Business Association (SBA), in 2010 there were 27.9 million small businesses operating in the United States. Opening a business can be one of the most exciting endeavors in a person’s life. As exciting as it can be, however, it can also be a bit intimidating. Opening a new business properly involves delving into areas such as tax, market research, and the law.
Unfortunately, statistics from the SBA show that only half of all small businesses will still be around five years after opening their doors. Preparation and planning up front, however, can help to avoid this fate and lead to success later on. Below are some important steps in the process of starting a business. You may find that there are several resources available to those starting a new business in New Mexico and that you are able to conquer some of the process on your own. There may be other steps though that are a bit more challenging. For these, you may find that consulting with a business law attorney will help to ensure a smooth process right from the start.
Have You Done Your Research?
In addition to only half of all small businesses being open five years after opening, the SBA states that only one third of all small businesses will be around 10 years after opening their doors. One of the major reasons new businesses fail is due to lack of planning. Business success is knowing, before you open your doors, your market, the need for your product or service, and where your company is going in the future. Hard work and extensive market research and analysis early on will pave the way to a well-thought-out and prepared business.
The Business Plan
Your business plan will be your new business’ road map. It is a written document that will provide your operational, financial, and marketing plan that can include balance sheets, income statements, and cash flow statements. The document can be modified as your company grows and can detail the past and forecast the future. Although not legally required, many find that a business plan is essential for the success of their company.
Choose Your Legal Structure
Choosing the legal structure of your company is an important step in starting a new business. The legal structure you choose will have tax consequences and will affect your personal liability. The various legal structures in New Mexico include:
- Sole Proprietorship – an unincorporated business owned by one person
- Partnership – a business relationship that involves two or more co-owners
- Limited Partnership – business relationship where two or more co-owners run a business whereby one or more of the owners is liable only to the extent of his or her investment
- Corporation – a separate entity formed to carry on a business that can sue or be sued, can issue shares of stock to raise capital, and has shareholders and officers that are protected from personal liability
- Limited Liability Company – this type of structure has characteristics of both a corporation and a partnership, it offers protection against personal liability as in a corporation but is treated as a non-corporate entity for tax purposes
- Nonprofit – this type of business structure is conducted not for the primary purpose of making a profit
Consulting with an attorney about the best legal structure for your business is a good idea. There may be important consequences for your business depending on the type of structure you choose. In addition, an attorney can discuss the best location for your business. Location plays an important role for companies for several reasons including everyday operations as well as tax and other legal considerations.
Your Business Name, Registration, and Tax IDs
What’s in a name? It just so happens that when it comes to choosing a business name, a name means a lot. Take your time when choosing your business name, do your research, and choose wisely. Your company’s name is the cornerstone of your business. It is the first thing customers will see, it’s your brand, and a big piece of your marketing.
Once you’ve picked the perfect name for your business, you will need to obtain your Federal Employer Identification Number (EIN). You can do this by going to www.irs.gov. You also need to register your business with the state of New Mexico and will need to obtain a Combined Reporting System (CRS) number used in the state to track tax payments.
Does Your Business Require a License or Permit?
Depending on the industry, the scope of business, and the location of the business, there are a number of laws and regulations you must familiarize yourself with when opening a business. There are also state laws as well as federal laws. In order for your business to start out, and stay compliant, reviewing your industries license and permit requirements with a business law attorney can save much headache down the road.
Funding Your Business
They say you have to spend money to make money. A big component of opening a new business is deciding how to raise capital; how will you financially support your business before you start making money? When starting a new business, the financial startup requirement can range from minimal to quite large. Luckily, there are many options available to new business owners but it is important to choose the option best for you and your individual needs.
Questions? The Attorneys at Legal Solutions of New Mexico Can Help
Navigating the world of business start-up requirements and regulations can be confusing and questions will certainly arise. Consulting with a business law attorney can help streamline the process and ensure that your new business starts out on the right foot – with a strong business plan, the right legal structure, all federal and state documentation properly filled out and filed, and all licenses and permits in order. Starting out carefully and properly can help ensure your doors are kept open for as long as you intend for them to be.