Get to Know MAFCU
Looking to Start Your Own Business?
January 18, 2016
By: Stacy Yu
Thinking About Starting Your Own Business?
These days, starting your own business has never been easier. Whether you are in the business of selling homemade products, providing consulting services, performing consumer related services, or providing any other marketable product, being a small business owner and entrepreneur can be a great way to take charge of your professional future.
If you are thinking of starting your own business, here are a few things to consider to help get you on the road to success.
1. Determine if the Venture is a Business or a Hobby
Do you have a hobby which could be a beneficial service to others? If so, with time, energy, and focus, your hobby could become a lucrative business venture. In the eyes of the IRS, whether your venture is a classified as a business or a hobby can affect how you report your end-of-year financials, as well as determine what expenses are eligible for tax deductions. To be classified as an official business by the IRS, the following must apply:
• You are registered as a business in the state in which the business operates
• You are putting in adequate time and effort in an attempt to make a profit
• You are keeping accurate records of your business finances
• You are making strategic decisions about your business based on research and finances for the purpose of financial growth
• If experiencing financial losses, the source of the losses are identified, and decisions are being made in an effort to become profitable within the first 3-5 years
2. Create a Business Plan
Having a business plan helps clarify the purpose, mission and goals for your business. It is also a necessary document if you are in need of financial funding. Before starting your business, take the time to think about your business plan. What is the purpose of the business? Who is the target market for your product or services? What geographic area will the business serve? What does the revenue structure look like? What are the strengths, weaknesses, opportunities, and threats of the business? Thinking through all of these questions can help put your business on the road to success.
3. Select the Business Entity
In the state of Maryland, businesses can be classified as a sole proprietorship, partnership, limited liability company (LLC), corporation, or nonprofit. How your company is registered can play an important role in how you conduct your financial reporting, in addition to how both your personal and business assets are protected in the event of a legal action. To determine which business entity is right for you, do your research and consult with a business lawyer prior to registering your company.
4. Understand the Upstart Costs
Identify how much money will be needed to start your business. When determining how much funding is required, items to consider include materials needed to provide your goods or services, such as equipment, raw materials, and direct labor, as well as any legal, accounting, real estate, technology services, marketing and other operational costs necessary to create a stable business entity.
5. Identify Funding Sources
Once start-up costs have been determined, think about where initial funding for the business will be sourced. Is self-funding an option? Will a small business loan be required? If a loan is needed, contact MAFCU's Small Business Account Department to determine what steps you can take to secure a small business loan. Mid-Atlantic Federal Credit Union partners with the United States Small Business Administration to offer a wealth of lending solutions and resources for small businesses and entrepreneurs.
6. Register for a Federal Employer Identification Number (EIN)
As a new business, it is important to register for your Federal Employer Identification Number. Doing so will legitimize the business with the IRS. Registering will also enable you to hire employees, open a business account, form a business entity, as well as perform other important business transactions that will require either the IRS notification or legal assistance.
7. Register for State Tax Accounts
Taxes for your business must be paid to both the federal and state governments. To register for a Maryland State Tax Account, go to: https://interactive.marylandtaxes.com/webapps/comptrollercra/entrance.asp.
MAFCU offers a monthly seminar series for area business owners that discuss topics relevant to small and mid-sized businesses. MAFCU Small Business University (SBU) seminars are open to everyone, members and non-members.
Join us at the MAFCU SBU on Thursday, January 21, 2016, where United States Senator Ben Cardin will meet with Montgomery County business owners to address "Helping Marylanders Build Small Business Success." In this special event, Senator Cardin will engage in a conversational presentation with business owners, where attendees will have the opportunity to participate in a direct Question & Answer session with Senator Cardin. CLICK HERE to register for this event.