A Checklist for Your New Business

Use this list to get a handle on free resources, take care of procedural items, and decide on a business structure

by Karen E. Klein

I'm starting my own spa party business: doing in-home massages and facials and selling products. Where do I begin in terms of business structure, hiring employees, and buying my products wholesale? It's a bit overwhelming.—T.O., New York

There are many good resources online, and in your local library or bookstore that will walk you through the startup process. However, because questions like yours come up so frequently, we asked Martin Lehman, a counselor with the nonprofit SCORE NYC agency to provide some advice.

In terms of a legal structure (BusinessWeek.com, August/September, 2007) for your firm, it's easiest and cheapest to start out as a sole proprietor unless you know from the start that you'll need corporate protection, Lehman says. If you're not sure, talk to a business attorney or an accountant who's familiar with small business tax and legal issues. To register your business trade name as a sole proprietor in New York City, you'll need to file a Form X-201 with the county clerk's office in your borough. "Go to a commercial stationers and get Form X-201, fill it out, and have it notarized," Lehman suggests. You can also purchase and download the form from an online legal vendor.
Licensing and Liability Insurance

If you're starting this company with a partner, you'd instead file form X-74. "If you do this, be very careful about who your partner is and make sure you have a legal partnership agreement drawn up," Lehman says. If you eventually decide to incorporate or form a limited liability company (LLC), you can do that yourself or with the help of an accountant, attorney, or SCORE counselor, he says. You will find a good deal of detailed information about business registration at the New York City business solutions Web site.

It's probably best to book independent contractors to do massages and facials to start with, Lehman says. "Again, as your company grows, you can hire people to work for you full- or part-time," he says. Make sure you thoroughly check the backgrounds and licensing status of any freelance contractors you hire. If they will be going into your clients' homes, inquire about whether they carry liability insurance, which would be a good idea. Once you get big enough to have employees, you'll need to register as an employer with New York State, either online or by mail. You can get information on registration about obtaining an IRS Employer Identification Number at the Web site of the New York State Labor Dept.
Writing Your Business Plan

When buying merchandise, you'll want to go to your suppliers and negotiate the best possible prices. In order to sell the products at your parties, you'll need to apply for a resale certificate with the New York State Taxation & Finance Dept., collect sales tax from your customers, and make periodic payments to the state. Ask for Form DTF-17 from the state agency at (800) 462-8100, Lehman says, or obtain the form online. If you're not sure what other legal requirements apply to you, visit New York's OPAL (Online Permit Assistance and Licensing) Web site, which shows you which forms and permits you'll need depending on what type of business you're starting.

Before you check any of these procedural items off your list, however, you'd be very smart to write up a simple business plan (BusinessWeek.com, 1/7/08) that includes financial projections and calculates how much money you'll need to get your company started successfully. "We call it a 'who, what, when, where, why and how' plan," Lehman says. "I suggest you come to a SCORE office and sit with a counselor and they will help you do this." They can also advise you on issues such as whether you need insurance, how much you'll need to earn to cover your overhead and expenses, and how long your business should take to break even. Good luck.

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.