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Basic Guidelines for Starting a New Business
Business Entity
Form a business entity. Operating your business through a business entity can help protect you against
personal liability to third parties. Operating a business through a business entity may also have tax
advantages. We recommend that you talk to an accountant about the type of business entity that is right
for you (e.g. LLC versus corporation) based on your specific financial and tax situation.
Our law firm can assist you with the formation of the entity and preparation of business organizational
documents. Your accountant should review and approve the business entity formation and operational
documents that we prepare for you before you sign them. You should talk to your accountant about
obtaining a federal Employer Identification Number (EIN), state business identification number, and all
necessary tax filings, such as for an S-Corporation.
In the franchise purchase context, usually you should not form the business entity until the franchisor
has approved of you as a franchise purchaser. Also, you should wait to form the entity until after
you have completed enough due diligence that you are comfortable moving forward with the purchase of the
franchise. You should form the business entity before you sign the franchise agreement.
Before you sign any franchise agreements or pay any money, you should review the Uniform Franchise
Offering Circular with a franchise attorney.
Business Plan
Next, create a business plan. A business plan precisely defines your business, identifies your
goals, and serves as your firm's resume. The basic components include a current and pro
forma balance sheet, an income statement, and a cash flow analysis. It helps you allocate
resources properly, handle unforeseen complications, and make good business decisions.
Because it provides specific and organized information about your company and how you
will repay borrowed money, a good business plan is a crucial part of any loan application.
Additionally, it informs sales personnel, suppliers, and others about your operations and goals.
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much
hinges on it: outside funding, credit from suppliers, management of your operation and finances,
promotion and marketing of your business, and achievement of your goals and objectives. For more
information on forming a business plan, see the United States Small Business Administration website
at www.sba.gov/starting_business/planning/basic.html.
Bank Account and Merchant Accounts
Find a bank and set up an account for your business. Order checks and deposit tickets.
You may want to ask that your bank statements be cut off at the end of each month.
You may need to establish merchant accounts with Visa, Mastercard, Discover,
American Express, and/or other processors. They will need to know your checking
account number so that they can direct deposit your settlements. You may want to
ask that they settle to your bank daily and that they cut off your statement at the
end of each month. Shop around so that you can find a processor that offers a low
discount rate. You may need to get a processing terminal (if you are purchasing an
existing business, you may need to ensure the return of the existing terminal).
Licenses
Obtain relevant licenses and permits. Contact the offices of the states, counties and
cities in which you will be doing business to find out which licenses, permits and
certificates apply to your business. For example, the following types of licenses
and permits may be needed: business, health, liquor, special tax stamp, alarm permit,
sign permit, etc.
In Oregon, visit the Oregon Secretary of State Corporation Division website
www.filinginoregon.com for more information about starting a new business,
including information about business licenses and permits. (Go to the site's home
page and click on Business Wizard.)
Zoning Requirements
Ensure that the location you choose for your business is properly zoned for your
business activity. Other factors to consider include regulations on business
signs and parking at the location.
If you are planning to operate a business from your home, determine
if there are restrictions on home-based businesses in your area. Your city or
county planning offices will be able to provide you with this information.
Lease Agreement
Obtain signed lease agreement or assignment of lease agreement for the business
location, if applicable.
Purchase and Sale Documents; Financial Information
You may need to provide copies of purchase/sales documents and personal
financial information to the franchisor or landlord, if applicable.
Payroll
You may want to hire a bookkeeper or payroll service to process payroll.
They can process payroll, including issuing checks, making tax deposits and
furnishing payroll reports. They can file quarterly and annual reports to state
and federal taxing authorities. They can issue year-end W2’s and other
related forms. They will need your federal and state employer identification numbers.
Accounting and Records System
Establish systems for preparing and closing daily paperwork; issuing checks;
forwarding information to your bookkeeper in a timely manner; furnishing charts
of accounts to bookkeeper; monitoring cash flow; preparing and completing financial
statements; and reviewing financial statements.
Insurance
Find insurance coverage that meets the needs of your business (and that meets
the franchisor’s and landlord’s requirements, if applicable). You may want to
shop around to find reasonable rates.
Equipment, Supplies, Inventory, Advertising
Purchase or lease necessary equipment, supplies and inventory (including product,
cash on hand, and other inventory). Set up accounts with relevant product and service
vendors for ongoing product and service needs for your business (including supplies,
inventory and advertising).
If you are purchasing an existing business, you may want to obtain a supplier
list from the existing owner for product and service vendors in the local area.
You may need to ensure the return of any equipment leased by the existing owner.
You may also need to ensure that existing supplier contracts are canceled or made
a new under your name.
Maintenance Contracts
You may need to set up some of the following types of maintenance contracts:
janitorial; landscaping, window washing, fire extinguisher maintenance; security
alarm; linen service; music service; office supply vendors; vending machines;
pay phones; yellow page and related advertising; etc.
If you are purchasing an existing business, you may want to obtain a vendor
list from the existing owner for maintenance service vendors in the local area.
You may need to ensure that pre-existing maintenance contracts are canceled or
made anew under your name.
Utilities
Set up utility services such as water, gas, electricity, garbage collection,
telephone service (including long distance), etc.
If you are purchasing an existing business, you and the seller should notify all
utility providers of the change of ownership and set a day for meters to be read for
closing bills.
Safety
You may need to perform a thorough cleaning of the business premises. Ensure
compliance with health and safety standards set by the U.S. Department of Labor
Occupational Safety and Health Administration (OSHA). See www.osha.gov for more information.
Office Set Up
Make sure necessary manuals and files are in place in your business office.
Employees
Obtain or create employment application forms, employee confidentiality forms
and other relevant forms. Establish a system to ensure that employees complete all
relevant forms.
Obtain or create employee-training manuals and distribute the manuals to
employees during training.
Post Office
If you are purchasing an existing business, you may want to notify the
local post office of any change of name.
Security
If you are purchasing an existing business, you may want to change door locks
and security alarm codes.
Consent of Third Parties
If you are purchasing an existing business, make sure that the consent of relevant
third parties has been obtained, For example, the sale of franchise assets and the
transfer to you of rights and obligation under franchise agreements, leases, and
other agreements may require the approval of other parties to the agreements,
such as the franchisor and lessors.
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