Starting a Business in Georgia

Last Updated: August 26, 2018

Step 1 - Write a Business Plan

Business Start-up Checklist in GeorgiaPerhaps the most important, but often undervalued steps to starting a business in Georgia is writing a business plan.

A lot of people only write a business plan because the bank won’t loan them money until a business plan is submitted.  That’s a valid reason, but there is a more important benefit.  Writing a business plan gets the ideas out of the entrepreneur’s head and helps to create a roadmap for where they want the business to go.  Business planning is a critical element to creating a successful business.

A business plan doesn’t have to be difficult or intimidating to write. Since this is probably your first business plan, a little guidance will help. Here are some resources to get you started:

Step 2 - Select a Business entity

Select a Business Entity in GeorgiaThe second step to start a business in Georgia is selecting a business entity.

The business entity is sometimes referred to as the business structure.  This is how a business is legally organized to do business.  The four primary business entities include the sole proprietorship, partnership, corporation and LLC.  A brief description of each is below.

A Sole Proprietorship is an individual entrepreneur that decides to go into business for themselves. This is the easiest and least expensive of the four entities to set up.  The owner is personally responsible for all debts and actions of the company.  This is called unlimited liability and is the biggest downside to the sole proprietorship. This means if the business is sued, the owner’s personal assets are potentially at risk.  The owner will also pay self-employment tax on all business profits and may pay more in taxes than other entities.

There is no filing for a sole proprietorship in Georgia.

Learn more about the sole proprietorship advantages and disadvantages

General Partnerships consist of two or more people conducting a business together. Like the sole proprietorship, there is no formal filing.  Also like the sole proprietorship, the partnership has unlimited liability.  If the partnership were to be sued, each of the partner’s personal assets are potentially at risk.  The partnership itself does not pay tax from business income.  Instead, profits and losses are passed through to the owner’s personal tax return.  This income is subject to self-employment tax.

A Corporation is a legal business entity that is separate from the individual.  While corporations are more expensive and complicated than sole proprietorships and partnerships to form, the major advantage is that the corporation shields the owner’s personal assets should the corporation be sued. 

There are multiple ways a corporation can elect to be taxed.  Also, there is no self-employment tax with a corporation as income to the owner(s) will come from either a salary or dividends. 

The cost to form a corporation in Georgia is $100. The Articles of Incorporation must be filed with the Georgia Secretary of State

The Limited Liability Company (LLC) is a popular business entity choice. It provides the liability protection of a corporation with the ease of operation like a sole proprietorship.  The Limited Liability Company does not have the many burdens a corporation such as holding a board of directors meeting, shareholders meeting, taking minutes, etc.  The LLC also has the greatest tax flexibility of the four entities.  Income can be taxed as a pass-through entity like the sole proprietor or partnership or as a corporation.    

The initial cost to form a Georgia LLC is $100.  The Articles of Organization are filed with the Georgia Secretary of State.

To compare the pros and cons of each of the entities, see our comparison chart of business entities.

Step 3 - Register a Business name

Register a Business Name in GeorgiaAfter deciding on a business entity, the next step in starting a business in Georgia is to register a business name. 

HOW TO FILE A DBA IN GEORGIA FOR SOLE PROPRIETORSHIPS & GENERAL PARTNERSHIPS

If you are a sole proprietorship or general partnership in Georgia and doing business under your full first and last name, John Smith, for example, there is no filing, but if the business will operate under a trade name or fictitious business name like John Smith’s Handyman Service, Mr. Handyman, etc, you will need to file a DBA filing (Doing Business As) with the County Clerk’s office in county where the business is located.

To register the business name:

  1. Visit the Clerk of Superior Court in the county where the business will be located to obtain the DBA form. A few counties allow for online registration or have the form for download, but most of them require you to go to the office in person.
  2. Check to see if the trade name is being used in the county where your business is located by checking the Trade Name books. The name must be unique.
  3. Be sure the form is signed in the presence of a notary public.
  4. An advertisement is then required to be run in a newspaper that has county-wide distribution (typically one that also publishes the Sheriff’s advertisements) once a week for two consecutive weeks.

The assumed name is a one-time cost and initial filing costs vary by county.  Expect to spend $100 – $150 for the county and $30-$100 for the newspaper filing.

HOW TO RESERVE A BUSINESS NAME IN GEORGIA FOR A CORPORATION OR LLC

Corporations and LLCs have to pick a name at the time of filing for the entity and each corporation/LLC has to be uniquely named. 

To check the availability of names, visit the Georgia Secretary of State.

Step 4 - File for an ein

Business Start-up Checklist in Georgia

The Employer Identification Number or EIN (sometimes referred to as the Federal Employer Identification Number or FEIN) is a nine-digit tax identification number from the Internal Revenue Service (IRS). This number identifies a business operating in the U.S, tracks tax returns and is used to open a bank account. Much like what a social security number is to a person, the EIN is a social security number for a business. While most businesses will need to get an EIN, some do not.

Partnerships, corporations and many LLCs OR sole proprietorships with employees must file for an EIN.

Sole proprietorships or a single-member LLC with no employees is NOT required to get an EIN. In these instances, the owner’s social security number is used.

Filing the EIN online only takes a few minutes and the number is available immediately. Filing can also be done by mailing the SS-4 form or by calling the IRS. For more information about how to apply and to see our video with a step-by-step guide, check out how to file for an EIN.

Step 5 - Apply for Business licenses & Permits

how to get a business license in georgia

To start a business in Georgia, a company may require special permits and/or licensing. While there is no general state of Georgia business license, a business may need to register with a variety of agencies before opening. 

Georgia Sales Tax Registration – Any business in Georgia selling tangible personal property, provides taxable services or contracts to provide services in the State of Georgia will need to register for a Sales & Use Tax Certificate.  Online registration for the Sales & Use Tax Certificate is available through the Georgia Department of Revenue.

In general, Georgia imposes a sales tax on the retail sales price of physical products and certain services. While most services are exempt from tax, Georgia does tax the sale of accommodations, in-state transportation of individuals (e.g., taxis, limos), sales of admissions, and charges for participation in games and amusement activities.  In addition, Georgia imposes sales tax on charges by the seller that are necessary to complete the sale of taxable property.  For example, if a seller charges $20 for a shirt and $5 to deliver the shirt, sales tax is imposed on $25 ($20 for the shirt plus $5 for delivery).

More information about what is and isn’t taxable in Georgia is available from the Georgia Department of Revenue.

Professional & Occupational Licenses – A variety of professionals in the state are regulated and need to register such as interior designers, accountants, home inspectors, landscapers, plumbers and many more.  Additional information, fees and licensing for regulated professions are available from the Georgia Secretary of State.

In addition to professional licenses, businesses in a variety of industries such as food establishmentsdaycaressalvage yards and many others require licensing.

Local Business Licenses – Most cities, towns and/or counties in Georgia require a business to register, even occasionally those that are home-based businesses.   Each local entity has its own rules for business activity, so requirements vary depending on location as some require a business license while others have requirements for zoning, building/ building improvements, signage requirements, liquor licenses, etc.  

The city hall, mayor, economic development office or even the Chamber of Commerce are all good places to contact and find if you need a business license in your community. 

 

Step 6 - Find Financing

Finding Financing for a Business in Georgia

Obtaining financing for a small business can be a stressful and time-consuming process.  Similar to getting a home loan, the bank is going to want lots of documentation on your personal finances in addition to a solid idea and the business plan.

As a rule of thumb, banks will want to see the owner invest 15%-25% of their money (equity) into a start-up business.  That can include cash but also any buildings, tools, vehicles, inventory and equipment that will be used in the business.  It is likely that the bank will want a lien on those items.

Credit score is going to play a large part in getting a loan approved.  Start-up business loans are largely based on the owner’s personal credit and their personal financial statement.

There are a number of options to finance a business.  A few of the more popular ones include:

Conventional Bank Loan – These are available at many financial institutions like banks and credit unions.  Banks are typically very conservative and place a lot of weight on the owner’s personal credit, equity and collateral.  After reviewing the business plan and personal financial information, they will respond with a yes, no or maybe.  Yes is great but we recommend talking with at least three banks to get the best rates and terms for your business.  No isn’t necessarily bad, as a bank may have many loans with other businesses in your industry or they don’t make loans for your type of business (restaurants are a typical example).   If your loan has more risk than they want or if you don’t have sufficient credit, equity or collateral they may answer with a maybe and want a loan guarantee.

Expect the loan approval process to take anywhere from 2 weeks to 6 months (and possibly more) depending on the amount being borrowed, the complexity of the project and owner’s personal financial condition.

SBA Loan Guarantee – When a small-business loan is riskier than the bank wants to take on, there are loan guarantee programs from the Small Business Administration (SBA).  This is a federal program that provides a guarantee to the bank that will pay a percentage of the loan back to the bank if the loan isn’t paid by the business owner.  The percentage depends on the program but typically ranges from 50%-85%.  Contrary to popular belief the SBA doesn’t provide business financing but they do help in getting money to small businesses by taking a majority of risk and encouraging the bank to make loans.  Another thing to note is that SBA guaranteed loans will cost the owner more in closing costs, fees and interest.

Peer-to-Peer LendingSometimes a bank isn’t the best option, due to the difficulty in getting a start-up business loan, credit purposes or the time needed to get funding.  In this case, peer-to-peer lending provides an interesting way to borrow money without going to a bank.  These are personal loans and rates will vary on the owner’s credit.  Loans will typically go up to the $35,000 – $40,000 range.  Two popular options are Prosper and LendingClub.

Many people will use peer-to-peer lending to get their business off the ground and go after more conventional financing once the business is established.

Grants – There is a lot of information online about all of the free money for businesses and most of it isn’t true.  There are some small business grants.  Most are for established businesses doing research and but occasionally there are private grants for business startups.  Do your research before applying and don’t pay for information telling you where the grants are, no matter how good their money-back guarantee is.  All of the federal grant information is available for free at http://grants.gov.

How Do I Hire Employees in Georgia?Before hiring employees, there are several items that a small business owner needs to be familiar with before making their first hire.    

Register as an Employer – Employers will need to register with the IRS (EIN number) Georgia Department of Revenue (Withholding Tax Number) and the Georgia Department of Labor  (Unemployment Insurance Tax Account Number)

Fill Out Paperwork For New Employees – When hiring a new employee there are four forms that will need to be filled out; New-Hire Reporting Form (Georgia New Hire Reporting Center), I9 (Form I-9, Employment Eligibility Verification), W-4 (IRS’s Publication 15 Employer Tax Guide), and the G-4 (Georgia Employee’s Withholding Exemption Certificate).

Federal & State Income Tax Withholding – Employers withhold money from each employee’s paycheck to pay that employee’s federal and state income taxes. The employer pays no part of the withholding tax, but is responsible for collecting and remitting the taxes that are withheld.

Social Security & Medicare – To comply with the Federal Insurance Contributions Act (FICA), an employer must withhold the employee’s portion of Social Security and Medicare taxes and the employer matches.

Federal & State Unemployment Insurance – Employers are responsible for paying taxes to compensate workers who have recently lost their jobs, which is through federal & state unemployment insurance.

Worker’s Compensation Insurance – Workers’ compensation provides compensation benefits and covers medical costs to employees injured on the job.    Worker’s Compensation Insurance is administered through the Georgia State Board of Workers’ Compensation.

Labor Laws – Employers should also understand the various regulations and laws pertaining to employees. If you plan to hire employees, learn the rules that apply to your business. Federal laws, depending on your sales volume and number of employees, may supersede state laws.

Consult with the Georgia Department of Labor and U.S. Department of Labor to learn more. If you are unsure of your obligations, an attorney’s guidance can be also useful in assisting you to meet legal requirements.