You must have pondered the idea of quitting your current job and starting your own business at least once in your career, but you never made the step. Have you ever thought what the reason behind that decision was? Fear of failing, fear of having to make decisions, fear of not reaching the goals you have dreamed up in your head? These doubts can be the reason for many to turn their back on running their own business. But, if you ever dreamed of the possibility to start your own company, you should pursue the idea.
These fears can be justified but should never be the reason to turn your back on this option. Running your own business brings a number of advantages if you do everything correctly. One of these advantages is getting rid of these fears and doubts. Remember all the lessons you have learned as an employee, remember all the tricks of the trade you have been thought. Take a moment to summarise all the skills you have acquired over the years of working for someone else. You have to realize that you have already been a part of the business world for years and that all you have to do now is step up a notch and do it for yourself. You already know the market conditions, you already know the best suppliers and the market gaps you can exploit. You have the necessary skills to do it, you just have to apply them.
In addition, you will stop questioning your experience because every day of being your own boss is a new experience and you will be learning faster than you have been learning so far. You will also stop questioning your decisions because there is no one to respond to but yourself. As your own boss, you are the one who makes decisions and pulls all the strings.
We have to be realistic and say that things don’t always work out as we plan, and that success does not come on its own. But if you put in the hours to set everything up properly, very soon you will start enjoying the advantages of being a business owner, such as flexible working hours, doing what you love, having more free time, having your business work for you and not the other way around.
But before you jump into the entrepreneurial waters, there is some preparatory work that has to be done and some regulatory obligations you have to familiarize yourself with.
Even before looking into the legal registration of your business, there are some steps you have to complete first. Having a plan is good, but working that plan out in detail is better. This is why it is advisable to develop a strong business plan that will cover all the aspects of your business. If you have never made a business plan before, you have the option of contacting an attorney or a business advisor. According to the IASourceLink, established by the Iowa Economic Development Authority (IEDA) together with the Center for Business Growth and Innovation (CBGI) at the University of Northern Iowa.
There are a number of organizations in the state of Iowa offering business counseling free of charge such as the Iowa Small Business Development Centers. IASourceLink itself is an online resource for entrepreneurs. It is certainly a huge help to be able to consult with a professional that will go over your business plan, financial predictions, help you in your market research in order to help you build a solid business plan. This will be useful later if you decide to apply for additional funding from banks or any other financial institution. A business plan is, in most cases, the first document to be requested by the banks to even consider lending you money to start your business.
In the process of creating a business plan, you will have to carry out market research to get to know the market you are targeting. There are certain things to focus on when it comes to researching the market. Look at your potential customers. If you are looking for individual buyers, look at the age groups, the general demographic of your potential customers and what appeals to them. If you plan on working with other businesses, selling them merchandise or providing services write down all the specifics about this business, the type, the industry, the size of a business as well as where it is located.
The next step is to look for the market, whether you plan to operate on a local level, state-wide or maybe even international level. Also, while researching the market for your customers and your potential reach, look for segments that could be short of supply. Such segments are usually a very good starting point due to an existing demand that is outweighing supply. This means there is less competition and it will be easier to settle into a rhythm and gather experience without pressure from the competition to edge down prices or eat into your profit margin to stay competitive.
Also, you have to pay attention to the current state of the industry on all levels and whether there is an actual demand for the product or the service you are providing. For example, if you plan to buy wholesale electronics for resale you should look into the electronics market, whether it is booming or maybe the demand for new, or used gadgets is fading? Is there fierce competition or is there a lack of it?
Competition should be a specific focus of your market research. Take a close look at your potential competitors and compare and contrast the services, the products, the prices, target markets to that of your business to see whether you can edge out an advantage for yourself, or maybe, as we previously noted, tap into a market where the demand still outweighs the supply.
With your market research as well as your business plan complete, it is time to look into the next aspect of the business registration process: the regulatory process.
The first step when it comes to registering a business in Iowa is to decide what legal structure your business will take. This, in part, depends on the size of your business and potential tax requirements you might have to comply with down the line. The options you have at your disposal are sole proprietorship, partnership, limited liability company (LLC), corporation types, nonprofit and cooperative.
A sole proprietorship is in general the easiest to set up and maintain as it is owned by a single person who runs the company. But since there is no legal distinction between the business and its owner, the owners are responsible for any liabilities or debts of the business. To register a business as a sole proprietorship, contact your local county recorder.
Partnerships include two or more persons who joined to conduct a business. There are a few partnership options. A general partnership allows for all the members to share the company’s responsibilities and profits and liabilities according to a partnership agreement. It is also registered with the local county recorder. However, limited partnership and limited liability partnership are different in that they have what is called general partners and limited partners. Limited partners often don’t have a direct role in the day-to-day operation of a business and their liabilities are assessed according to the size of their investment in the company. In a limited liability partnership, each partner is responsible for their own actions. Both structures require registration with the Iowa Secretary of State.
At the top of the list in terms of complexity are corporations, which are independent legal entities in themselves, independent from their owners. Shareholders in a corporation are not liable for its debts beyond the level of their shares.
In between the corporations and the Limited Liability Partnerships sits the limited liability company (LLC) structure, which provides owners with limited risk. However, unlike corporations, it is not subject to double taxation.
After you’ve chosen the legal structure of your business, it is time to choose a name under which your business will operate. Iowa requires all businesses to register a business name and this process is again done through the local recorders for sole proprietors and general partnerships and through the Iowa Secretary of State for corporations, limited partnerships, limited liability companies, and nonprofits. You have to keep in mind that you are required to register a unique business name that is not in use already. To check whether a name you intend on using is indeed already taken by someone else, visit the Secretary of State’s Business Entities Search database.
The next step in the registration process entails applying for relevant tax permits and a tax ID. However, these will be discussed in more detail further down in this article. But, before focusing on taxes, we have to add that some business might require specific business licenses and permits. You might be subject to a federal or state business licensing requirements and will have to apply for a certain license of which there are 40 in Iowa. You can view the full list of licenses in Iowa and determine whether your business requires one on IASourceLink’s Business License Information Center.
With all these steps completed, it is time to turn to the most complex aspect of the business registration process: taxes. First, you will have to obtain the Federal Employer Identification Number (EIN), which is in the majority of cases required. This process can be completed online through the Internal Revenue Service’s website.
With your EIN in place, you have to turn to the Iowa state tax requirements and familiarize yourself with local regulations. The first thing to determine is whether you have a sales tax nexus in the state of Iowa. If you have an office, a storage space, an employee or a representative in the state of Iowa, then you have a sales tax nexus. For a more detailed explanation of the Iowa sales tax nexus read through the Department of Revenue’s document.
The next step is to determine whether the products you sell are taxable. We have already used the wholesale purchase of electronics for resale as an example. In this case, you will be engaged in retail of some kind and selling tangible products in the state of Iowa, which is taxable. On the other hand, services are not taxable. However, there are exceptions and you should check the services that are taxable here.
If you do determine that what you are selling is taxable, you will have to apply for a sales tax permit in Iowa. This process can be completed online through the Iowa Department of Revenue or by filling out the Iowa Business Tax Permit Registration and mailing it to the address provided in the Contact Details Section below.
You will have to provide your personal information, business information including your business entity type, the date you started selling in Iowa and the types of products you sell. The application is free of charge and the permit will be awarded within four to six weeks. Also, once you have your sales tax permit, you do not have to renew it.
Like many other states, Iowa provides certain exemptions and makes it possible to purchase merchandise without paying tax under certain conditions. For the purpose of this article, we will focus on items that are purchased for resale. The Department of Revenue notes that a sales tax permit does not act as an exemption certificate. Sales tax exemption is achieved by presenting a sales tax exemption certificate to the seller when making a purchase of items you intend on reselling.
In order for the exemption certificate to be valid, it has to be filled properly. In case you are making a number of purchases from the same seller, you may provide your source with a blanket exemption certificate.
However, you can also find yourself on the receiving end of a sales tax exemption certificate, in which case you have to make sure it is complete and signed by the buyer. You must keep the accepted exemption certificate on record for at least three years in case of an audit.
While you may not be able to completely verify the validity of the exemption certificate online, you are able to verify the buyer’s tax ID, which will be provided with the certificate by calling the Iowa Department of Revenue.
PO Box 10470
Des Moines, IA 50306-0470
Fax #: 515-281-3906
Phone: 515-281-3114 or 800-367-3388
For Billing & Collections call: 866-339-7912
First Floor, Lucas Building
321 E. 12th St.
Des Moines, IA 50319
Phone: (888) 767-8683
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Ames, IA 50010-9166
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