A Guide to Starting A Business

Starting a business can be both exciting and overwhelming. Whether you’re formalizing a growing side business or franchising a successful multi-unit operation, a new business begins with an idea. With thorough research, purposeful planning, and a series of process-driven steps, that idea can mature into a viable business. If you’re wondering how to start a business, you’re in the right place.

Plan for Success

The first “investment” to make in your business is the time it takes to thoroughly research your idea and to create a business plan.

1. Conduct Market Research

Did you identify a gap that your new business will fill? Are you frustrated with a lack of goods or services–or quality issues–that you know how to solve? Or maybe you’ve created something new and you need a marketplace to showcase it.

This is the time to get a firm handle on who your target customers will be, who your primary competitors are, and what sets your business apart.

This is also the time to look inward. What strengths do you bring to the business? What challenges will you need to support with additional or outside resources?

A realistic look at the road ahead will help you prepare for the inherent ups and downs of starting and operating a business.

2. Create a Business Plan

A business plan is the solid foundation that charts your course. Numerous online resources and templates are available, including on the Small Business Administration. Not only does your business plan provide you with a roadmap, but a formal, detailed business plan can also be an important tool for successful fundraising.

3. Choose Your Business Structure and Secure Your Business Name

Your business name is important–after all, you only get to make one first impression. Right from the start, your business name and entity structure set the tone for your business.

Determine the Right Fit for Your Business Structure

Tennessee business founders have numerous choices when it comes to business structure, each with its own potential benefits and drawbacks. Some common choices for Tennessee business entities are:

• Sole Proprietorship: This is the simplest form of business structure–the classic “mom and pop shop.” While there is no formal filing process (or associated cost) with the Tennessee Secretary of State, this business structure offers no liability protection to the owner.
• Limited Liability Corporation (LLC): An LLC offers flexibility and provides a liability shield to its members. The LLC and its articles of organization must be filed with the Tennessee Secretary of State. An operating agreement is an important document that provides clarity to members, setting out membership interests, roles, and decision-making processes.
• Corporation: If you anticipate investors or equity shares, a corporation might be the right business structure for you. The corporate charter must be filed with the Tennessee Secretary of State. Like an operating agreement for an LLC, the Corporate Bylaws set out the ownership interests, roles, and decision-making processes.

Win the Name Game

Before you file with the Secretary of State, you need to make sure the legal entity name you want to use is available with the Name Availability Tool.

As a practical matter, you may also want to explore:

• Legal right to use the name: Even if the entity name is available through the Tennessee Secretary of State, you may still face a federal trademark challenge from a similar business already using a similar name. Use the USPTO tool to ensure your business name is unique and consider filing a trademark to protect it.
• Digital control of the name: Your digital presence is essential in today’s marketplace. Now is the time to check on domain availability for your website, as well as social media handles. While these names don’t need to be an exact match to your legal entity name, it’s a good idea to know what your digital naming options are and to discover any digital presence that might confuse people (or search engines) looking for your business.
• Potential risk of market confusion: On a similar note, if your own online search of your legal entity name turns up a similar business, that business may have a common law right to the name–even if it is not trademark-protected.
• Using a DBA or assumed name: If you plan to operate under a name different from your legal entity name (known as a “doing business as” (DBA) or an “assumed name”) in Tennessee, you will need to take additional steps, depending on what type of business entity structure you’ve chosen. A corporation or LLC needs to file all assumed names with the Tennessee Secretary of State. For a sole proprietorship, you need to check at the county level for assumed name availability and to register.

Taking the time to clear your desired business name or names is a low, upfront cost that can prevent a much higher cost-forced rebranding effort in the future.

4. Get Your EIN and Set Up Bank Accounts

Your LLC or corporation must apply for an employer identification number (EIN) with the Internal Revenue Service. A sole proprietor often may simply use their own social security number (SSN) for identification purposes. But for certain tax situations or if the business will hire employees, a sole proprietor must also apply for an EIN. Even if it's not required, a sole proprietor may opt to obtain an EIN. With an EIN, a sole proprietor can set up a business bank account without using their own SSN. Of note, sometimes a vendor or client requires a W-9 with an EIN.

Setting up your business bank accounts is crucial for keeping business money separate from your personal finances. Mixing business and personal funds can pierce the personal liability shield provided by the LLC or corporate structure and create an IRS audit risk.

5. Register for State Taxes and All Required Licenses

Understanding your tax and licensing requirements is important. Mistakes can result in severe penalties.

Although Tennessee doesn’t impose a traditional personal income tax, it does impose three different business taxes that may apply to your business:

• Franchise and excise tax
• Business tax
• Sales and use tax

You are encouraged to consult with your tax advisor regarding questions you may have about tax implications.

You must register your business with the Tennessee Department of Revenue and obtain any required state or local business licenses and industry-specific permits.

Plan for Risk Management

One of the most important things you can do for your business is to proactively plan for risk management. When you operate a business, the question of risk is usually not “if” but “when.” If you take risk, crisis, and reputation management seriously from the start, your business will be well-positioned for any uncertainty ahead.

Work with an Experienced Tennessee Attorney

A lot of legwork goes into starting a business. Even with all of the resources available online, the process can be time-consuming and take away from your time actually operating your business. Partnering with an experienced Tennessee attorney gives you the peace of mind that comes with a cohesive start-up or ongoing operations plan. Our general counsel services blend business formation, tax strategy, contract support, risk management, and more. Contact Dedicated General Counsel today at 615-585-2140. Let us clear the way so you can focus on business growth and success.