| NYC Business Group
How to Start a Consulting Business in New York
Starting a consulting business in the State of New York can help you earn a living or supplement your income. However, the process of starting a consulting business is not easy because it entails choosing a business entity, obtaining licenses and permits, handling tax issues appropriately, dealing with health and safety, handling policy statements and contracts, obtaining insurance, and dealing with your employees. Although some consultants have their own offices, some work at other people's businesses (indoor or outdoor). To start a consulting business in New York, here are essential steps to help you get started:
Choose your business structure
While you can operate as a sole proprietorship or partnership, it is crucial to choose the business entity appropriately. Many consultants prefer operating as a limited liability company (LLC) to minimize the risk. Operating as an LLC protects you from personal liability from business decisions or actions of the LLC. A sole proprietorship is the simplest way to start a business, although there is no legal difference between the owner, you, and the business. Therefore, in case of debts and business obligations, you can be held liable personally. To manage any form of risk, sole proprietors are encouraged to select the right business insurance and consult the experts to choose the best business structure. We can help you with a Business Owner's Policy, Click Here!
Licenses & permits
Whether you are a sole proprietor or in a partnership, you should obtain specific licenses and permits. Firstly, consider obtaining the federal tax ID number online via www.irs.gov. You may need to obtain a local or state license from a government office, for example, doing a business (DBA) certificate. The Online Permit Assistance and Licensing (OPAL) system can help you generate any licenses or permits required to start a consulting business.
Secondly, if you will be selling goods in your consulting business, you must visit the OPAL system to obtain a certificate of authority to collect sales tax. Finally, if you are working from an office, it is vital to consider zoning laws. Therefore, familiarize yourself with the zoning regulations and get a compliance certificate if need be.
Health & safety
If you work in an office, health and safety might not be a concern. However, if you provide outdoor services, interact or engage in potentially dangerous situations, health and safety are significant concerns. Visit the New York Department of Health to read about the Environmental Prospection Agency (EPA) and Occupational Safety and Health Administration (OSHA). Also, you can investigate more about occupational health, safety, and the environment.
Tax issues
The legal form of your business (partnership, corporation, LLC) determines your tax situation. Remember, even if you operate with a sole proprietorship, you will attach Schedule C to your personal income tax return. If you were previously employed, tax matters could be challenging and confusing. Ergo, it is advisable to seek accounting services to help you get started. Since consultants are self-employed, you will be working with IRS Form 1099-MISC. The form will be provided by the clients hiring your consultant services at the end of the year. Personally, you will be subjected to the federal self-employment tax (depending on the legal form of your consulting business). Therefore, you are required to make quarterly estimated tax payments. However, if you operate out of your home, you can claim a business deduction. If you do not understand tax matters, consult an experienced accountant.
Insurance
Your business's details dictate the type of insurance you should invest in. if you operate out of your office, you should invest in premises liability insurance in case of slip and falls or when a client is injured in your business location. Also, investing in property coverage is recommended to insure your equipment. For consultants who work in potentially dangerous situations, they should invest in personal injury insurance for themselves and other people. Similarly, if you drive to and from job sites, obtaining vehicle insurance is prudent. Ideally, working with different insurance agents is recommended. Agents from different areas of expertise can help you get the best information and coverage. Interested in Professional Liability? Someone in our office, can get you the right policy for your needs, here!
Policy statements & contracts
Since consulting is broad and flexible, some clients may require different consulting services. Ergo, formulating and providing written policies to your clients in advance is a good move. Although you will post the policy statement on your website, have printed documents to give to each client before you agree on anything.
General policies differ depending on the consulting business you are involved in. some of the issues you should include in your policy statement are:
- Billing issues – do you bill by the job, hourly, weekly, bi-weekly, monthly, etc.
- How do you get paid – do you expect a monthly payment, accept retainers, or take periodic payments?
- Who pays for certain expenses like hotels, special equipment, and airfares
Each client has a specific agreement depending on the services to be offered, among other factors. The contract form should include specific details such as expenses, payments, and billings. Typically, for a contract for services to be binding legally, the following must be met:
- You and your client must agree on the contract details.
- An exchange of value if a must, i.e., you provide services and the client pays
The contract may not be in writing if the services will be completed in less than one year. Be that as it may, most consultants do not take that risk. The first thing is to have a written and signed agreement before offering consulting services. To make the process easier, have a lawyer draft a standard contract that you can easily modify for each client. Make sure your business is covered fully, Contact us and find out rates today!
Employees
Familiarize yourself with fundamental employment law to deal with the hiring process, workers' compensation, and illegal discrimination. Researching employment law can help you deal with employees efficiently and avoid lawsuits. When hiring employees, make sure:
- You create a professional and legal application that doesn't include illegal questions
- Check references and conduct background checks. Remember to avoid violating privacy laws or seek illegal personal information
- The interview questions should be legally permissible and useful