The most important part in starting a small electrical business is in the preparation relating to due diligence and feasibility. This is the difference in one man’s operation just paying the bills and another prospering–doing the investigation and having a good insight into where the market will be, who it will be determined by the demographics of the area and the competition. Take all the information gathered and formulate a business plan.
Decide on a name for the business and file for a DBA fictitious name. Contact the IRS and request an federal tax ID number.
Follow the business plan. If the services (such as rewiring homes, repairing wiring damaged by rodents, replacing old or worn out equipment such as fuse boxes, installing wiring for new fixtures) will be promoted and sold from an office, several things should be considered. The location for accessibility, part of town customers have to travel through to get there, parking, lighting, walk in traffic and what does the location do for your image. Check the areas within a preferred driving distance and look for the types of businesses that are good prospects. Check the demographics of the area for the largest concentration of middle class to affluent customers. The business plan should also include financing to start–the total liquid cash as well as assets to include equity, stocks, bonds, securities, insurance policies and 401(k)s.
An LLC affords tax advantages and limited liability in the event of a failed business and limited protection in a lawsuit. Many times, with an LLC, creditors will work on the strength of your personal credit rather than that of the business. They will also require a personal guarantee or security for credit. If anything happens they come after you as the guarantor. A corporation has less tax advantages than the LLC but the business is a separate entity from personal property. Credit is given on the strength of the corporation and liability is also with the corporation only. Research the different entities before choosing the one that fits your specific profile.
Decide the amount of inventory and associated cost and number of employees. Locate local providers for the electrical parts you will need while completing service related calls. Check with all the wholesale vendors and inquire as to method of payment and amount of purchase to achieve the lowest prices.
Contact an insurance company and get a quote. Insurance for a business with any amount of liability can be a major cost factor. They usually want 50 percent down and then monthly payments for not more than six months. They will need to know the location, what kind of service, number of employees, type of inventory and whether the company handles hazardous materials.
Obtain occupational licenses from the state, county and city. Permits such as the sales tax permit allows you to collect tax and buy wholesale. The employee tax permit allows you to take taxes from the employees’ paychecks. There is also a cost for the department of agriculture license who are also affiliated with the EPA. All of these forms can be obtained by contacting the IRS and tell them you are a new business and need all the forms. Licenses and certificates for each city, county and state may differ. Check to see if you will need a contractor’s license to complete service-related work (most areas will require this, and will also require you to be bonded and insured).
Get at least two double entry ledgers. One for business expenses and assets as well as bills and tax owed to IRS on the business, equipment purchased, building maintenance, money invested in 401(k) accounts for employees, payroll, social security taxes and other business accounting. The second journal should contain all the sales and the sales tax collected and owed to the IRS.