LICENSES, TAXES, AND FINANCIAL INFORMATION

Four important areas in starting a business are licenses and government regulations, taxes, financial areas and managing risk and legal structures. This is not that complicated, but is an important step in starting your tea business. You need to set up yourself professionally.

Here’s what you’ll need to know about naming your business, getting a business license, obtaining a resale tax number, opening a business bank account and credit card, dealing with the IRS, deciding on legal form of business, and managing risks.

If you haven’t already done all of this, it is not too late to do it now and protect yourself. Please be advised that I am not a legal expert. If you have legal questions about your business, I would suggest that you invest in a good attorney or CPA that can answer your questions. It is money well spent. It generally is far less expensive to spend the money up front than to try to fix a problem later on.

Step 1: Choosing your business name

This is one of the fun parts of starting a business is you naming your business. If you’re opening a tea room, you can either use your own name or come up with something cute and unique. Find a name that will encompass all areas that you are interested in—tea room, tea party catering, gift shop, tea education, etc. You want to leave room for growth and/or change.

I was going to name my tea room “Sally’s Tea Cozy.” I originally wanted to name it the “Tea Cozy” but my friends talked me into adding my name so they could say, “Let’s go to Sally’s.” However, I never did open the tea room. I started a tea catering business instead. I was going to name it “Tea Talks and Tastings.” Because not only was I going to cater parties, but I wanted to give talks on tea and do tea tastings and do in home parties. I eventually just reduced it to “Tea Tastings.” This name covered not only tea parties, but also tea talks and tea tastings and anything else related to tea.

Changing a business name after you have used it can be a real hassle. If you already have stationery, business cards, etc. printed with a name, you have to redo all of it and that can be expensive. If you are on the internet, you have to forward everything to your new site and that can be a hassle. You may not know all the links to your old site to have them forwarded to your new one.

After you name your business, it is time to register your business name.

Step 2: Registering your business name

First thing you have to do is to make sure no one is using the name you have picked out. It’s important to register your business name because if you don’t, someone else could register it and you would lose the right to use that name. First, check the web to see if someone else has registered your chosen business name in your state. You can find your state's Secretary of State office and locate the business name registration area on your state's website. Most states' Secretary of State websites have a business name search feature and information on registering your chosen business name in your state.

Go to your own state’s office of Secretary of State. Go to the registration area to register your business name. Follow the directions for registering your chosen business name.

Another good idea is to trademark your business name and logo for national protection. Go to the “trademarks” section U.S. Patent and Trademark Office. There is a fee and, of course, paperwork to fill in. This is well worth the effort.

Step 3: Obtaining a Business License

Every state has their own regulations for obtaining a business license. All you need to do is call the city clerk’s office listed in the government section of your telephone book. Some cities have this online so go to your city.gov to find out if you can do this online. In Reno, the fee is $60. They can tell you how to obtain a license. There is of course, a fee and paperwork. Usually one visit to their office is all it takes to get your business license. This is an annual fee. For more specific information see Government Regulations.

Step 4: Getting Your Resale Tax Number

Since you are going to be selling food, tea, tea accouterments, etc. you need to have a sales tax number or a resale tax number (they are both the same thing.) You can find your state's department of revenue online or in the state government section of your phone book.

Yes, there is paperwork and a fee for this. This is renewed annually. In Nevada, the fee is $100.

Depending on how much you make each month, will determine whether you have to file a monthly or quarterly state sales tax form. These forms are short and easy to fill out. Since each county in Nevada has a different amount of sales tax, I had to keep track of which county I catered parties in so I would know how much tax to report. I would suggest you get a good software program like QuickBooks to keep track of this information for you.

Your state may require you to have a surety bond as security for the sales tax that you collect. Because my business was small, I only had to pay $100 for three years. Your state may have different requirements. You can find this information at your state's department of revenue online or in the state government section of your phone book.

This resale tax number allows you to purchase your supplies at wholesale prices. Some suppliers only sell to businesses with resale numbers (this is also referred to as a wholesale number or wholesale license.)

Of course, it is illegal to collect sales tax and keep it for yourself. In Nevada, you are allowed to keep ½% of the sales tax owed for collecting the tax for the state.

Step 5: Opening a Business Bank Account

A very important step in starting your business is to open a bank account in your business’ name. Have a separate account so you do not mix your own personal money with your business money. The IRS requires you to have a clear distinction between your money and your business’ money. You need to keep a record of your income and expenses.

Depending on what legal structure you decided on for your business, will determine how you will be reporting your income tax. See Legal Structures of Business.

Your business account is where you will deposit all the money you make from your business. It is also the account you will use to pay all bills relating to your business. If you are going to pay yourself a salary, you will write a check out of this account to yourself so you will have a record of it. It is not a wise idea to take money from a cash transaction for yourself. Deposit it first and then write yourself a check.

A good accounting software program, like QuickBooks, is an easy way to keep track of income and expenses for your business. It is also makes it easy to do financial reports for your business. Don’t let these programs intimidate you. Most Community Colleges have weekend classes you can take to learn to use these programs quickly and efficiently. Also remember that any money you spend to take these classes is an expense to your business and can be written off.

Step 6: The IRS

There are two things I recommend when you start your tea business that will help you get off to a good start:

1. Visit the IRS Small Business / Self Employed website. For a government agency, the Internal Revenue Service has done an excellent job with this website, making information very accessible and easy to understand for beginning professionals like us. In particular, please visit their page on starting a business.

2. Use the services of a professional accountant. A CPA who specializes in small businesses can save you a good deal of money and time. The money you pay your accountant will more than pay for itself. See Managing Risks. Your accountant will be able to help you set up your accounting books, but also do your income tax return for you. He or she will be able to answer questions that arise during the year and give you expert advice that will save you time, money, and aggravation. This is one person you do not want to leave out of your business.

Areas of Governmental Regulation Affecting Businesses

Legal Structures of Business

Managing Risk

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