How to Start a Business in Detroit MI
If you are starting a business in Detroit MI it can be an exciting endeavor. Although, such a journey will require a custom strategy and detailed planning. Anyone who's done it themselves will tell you starting a business isn't easy. Aside from the extraordinarily lucky, it is one of the most daunting and difficult experiences you will encounter in your lifetime. As such, we've compiled a list of tips to guide you on how to start a business in Detroit MI.
Detroit MI Business Startup Checklist Overview:
- Create a Business Plan
- Determine Legal Structure and Legal Formation
- Obtain an EIN Number
- Register for State Taxes and a State Tax ID
- Apply for Local Business Licenses and Permits
- Open a Business Bank Account
- Set Up Accounting
- Obtain Insurance
- Hire Employees
1. Create a Business Plan
A business plan is a roadmap of your business’ future. Generally, this living document lays out the next 3-5 years of success and how you intend to achieve it. A proper business plan should describe your business goals, the strategies involved, potential problems coupled with solutions for each, organizational structuring of your business and budget forecasting.
Resource: Business Plans: A Step-by-Step Guide
2. Determine Legal Structure and Legal Formation
One of the most important decisions you make when starting a new business in Detroit MI is choosing a legal structure. Each type of business has its pros and cons. It is generally a best practice to study each in detail and compare against your business priorities. For example: How risk averse are you and your partners? How would you prefer your business be taxed? Get familiar with the requirements for starting a small business.
Resource: How to Choose the Best Business Entity
3. Obtain an EIN Number
An EIN, commonly known as a Tax ID, stands for Employer Identification Number and acts as the unique identifying number for a business similar to how a Social Security Number is used as a unique ID number for an individual. The IRS uses EINs to identify businesses for tax purposes. When speaking about how to start a business in Detroit MI, you should be aware that you're going to need a Tax ID (EIN) in order to perform many actions, such as opening a small business bank account, hiring employees, etc.
4. Register for State Taxes and your State Tax ID
One of the primary requirements for starting a business is registering with your state. Registering a business with your Secretary of State is a step prior to obtaining your State Tax ID. Different from the Federal Tax ID, states have their own State Tax ID. This is a unique number assigned to a business or organization by the state where the business operated. It is primarily used for paying state taxes and hiring employees. Although each state has its own unique process for State Tax ID obtainment, most states enable you to get your State Tax ID the same day you apply.
5. Apply for Local Business Licenses and Permits
There are a variety of local permits and licenses which may be mandatory to your business. Whether it’s a tax registration from your local Office of Finance or a required permit for the sale of alcohol, you are likely required to show proof of your EIN Number to complete these applications.
Resource: Find your State Business License Office
6. Open a Business Bank Account
Having a bank account is essential to starting a new business. This monumental step in your path to success is typically very straight forward but there are common road blocks in the banking process. When opening your business bank account in Detroit MI don't get stuck at the bank searching for required documents - bring your state's Incorporation documents, your EIN (Tax ID) Number and all partners whose names you wish to include on the bank account must be present as well.
Resource: Business Bank Account Checklist: Documents You'll Need
7. Set Up Accounting
Most business owners understand they have to file taxes from the get-go. Why wait until the end of the year to handle one of the most important pieces of your business? Avoid unnecessary costs for late payments, late filings and other fees from the IRS. Handle or hire an accountant to handle your tax responsibilities early and don’t get stuck scrambling at the year’s end. An accountant will help you understand which items you need to provide in order to file on time, such as your Profits & Loss Statement, your business' EIN Number and other required information.
Resource: Small Business Accounting Checklist
8. Obtain Insurance
Many industries will require various types of insurance for specific actions to take place. For example: truck drivers need mandatory auto insurance in order to make deliveries on the company’s behalf. Now that you are starting a new business, it is in your best interest to get informed about your insurance options and be familiar with the regulations that apply to your specific type of business.
Resource: 5 Buying Tips for Small Business Liability Insurance
9. Hire Employees
Hiring your first employee is a milestone for any business, essentially opening the door to more profits and frees up time for owners to focus on high-level priorities. But before the interview process begins, make sure you have everything you need in order to legally hire an employee. You'll need to obtain an EIN Number and supply your new employee with the appropriate paperwork from the IRS.
Resource: Guide on Hiring Employees and Requirements