7 LIFT (Legal, Insurance, Financial and Tax) Prerequisites for Starting A New Business

Many entrepreneurs aim for starting their new ventures at the beginning of the year. As one entrepreneur guru, Michael Gerber, has explained, “The true start-up of a business is what happens before you start up.” So if you are thinking about starting up a new business in 2020, now is the time to start up by building the right foundation for that business. Here are 7 prerequisites for every successful business:

1. Discuss with legal counsel which corporate structure is best for your business

Sole proprietorship, partnership, corporation (C or S), or limited liability company (LLC). Factors involved in making this decision include how many equity holders are to be involved, who is to exercise control over the company and where you are establishing your business entity.

2. File the proper documents

To form a corporation or LLC, you can file paperwork directly with your Secretary of State’s office and pay the requisite fees for the formation as well as any publication fees providing notice of the formation or you can hire a service to do it for you or you can have us do it for you as part of one of our LIFT Start-Up packages. If you DO do it yourself or hire a service, be sure to understand all of the “additional paperwork” and administrative items you need set up, which do not get filed with the state, including: operating agreement or bylaws, membership certificates or shares, starting agreements, and minutes or corporate resolutions.

3. Have a Creative Business Lawyer™ prepare a Founder’s Agreement, Operating Agreement, Bylaws or Partnership Agreement

• This will establishes several aspects of the business, including:
• Names and responsibilities of officers,
• Issuance of shares or equity stakes,
• Procedure for annual and special meetings of officers and shareholders,
• Buy-outs of shareholders or equity holders,
• Dissolution of the corporation, partnership or LLC, and
• How to wind down business affairs upon dissolution or termination.

4. Set up specific bank accounts for the business

These banks accounts should be separate and apart from the personal accounts of any owners or managers.

5. Get your insurance lined up

Each new business should seek rates for general business insurance, errors and omissions for directors and officers, professional liability insurance, and employment practices insurance. If you have partner(s), you may also want to look into key-man insurance insuring one or both of your lives to provide liquidity to ensure the company can continue to run, even if you don’t. Ask us for a referral to an insurance agent we trust.

6. Devise payroll system

Devise a system with a business accountant or financial manager to handle payroll for employees that includes regular payments to federal, state and local taxing authorities plus to provide regular financial reports to you at least monthly, and ideally weekly so you can run your company by reading your numbers.

7. Consult with your tax strategist

Consult with your tax strategist even before you settle on your choice of entity and then when the entity has been created to ensure you are properly strategizing to save as much on taxes as possible. Having multiple entities can be the best tax planning possible.

One of our primary services is a LIFT Start-Up Session, in which we guide you through the right choice of business entity, location of business entity, start up agreements, intellectual property protection, employment structuring, insurance, financial and tax systems you need to start your next business and succeed right out of the gate. This session is normally $1,250, but if you are one of the first three people to schedule, we’ll take you through the entire LIFT Start-Up process for half that investment.