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Starting Consulting Business Guide
Starting Consulting Business Guide
Table of contents
Consulting business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Special considerations for starting your consulting
business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Preliminary questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Owners Toolkit.
continuous learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Consulting Business
The consulting industry thrives. Welcome to the world of
consulting a dynamic part of the ever-growing service
sector of our economy! Whether you will be helping to
solve problems and make decisions, to offer instruction
and training to staff, or to serve as a catalyst for change (or
do the dirty work of change), you will be providing an
essential service to your clients. You have the opportunity to
add significant value to their operations and to help them
be the best that they can be.
Consultants add value. A consultant is a person considered an expert in a specified field with a wide knowledge
of the subject matter and a depth of experience who
gives professional advice and counsel to another. You
can put your special knowledge and experience to
work, and provide an important service, by sharing your
wisdom and expertise with others. Consulting is simply
the sharing of knowledge, wisdom and experience. And
maybe one thing more a passion and enthusiasm for
the subject matter, whatever it may be.
Clients need consultants. Engaging a consultant offers the
client some real added value access to deeper levels of
experience and expertise for a special, often short-term,
need when it is not feasible to accomplish a particular goal
through in-house experts. It is cost-effective because the
client can purchase only as much service from the consultant as is necessary to meet the need.
Preliminary questions
What do you need to know before you begin?
Before you begin your consulting business, there are
many things to be considered. Ask yourself a series of
questions, and be thoughtful in your responses to them.
Do I have what it takes to start a consulting business?
Running a consulting business requires more than
merely providing consulting to clients. Whether I have
the competence and capability to provide a valuable
service is just the first consideration. Is my character up
to the challenge of leading a business, effectively coordinating all the responsibilities of a professional enterprise,
and balancing the needs of the business and the clients
with the needs of family and personal relationships? Do I
want the responsibility?
What roles will I have to perform that I dont perform
now? Managing a business, promoting a business,
providing a service to clients, billing and collecting fees,
maintaining records, employing people and paying
taxes are just a few of the responsibilities of running a
business. Which of these roles can I perform? What are
my strengths and weaknesses? How can I compensate
for my lack of skills in a given area?
What will my business plan look like? If I am going to start
a successful business, I need a business plan to identify
my goals and lay out the steps for achieving those goals.
What are my goals? What are my strategies for success?
Then consider how you will meet your goals operationally keeping expenses low by having a home office
and using temporary help to meet some of your needs
for administrative support; creating efficiencies such as
template documents that can be used for routine activities; developing brochures and other effective marketing
and promotional tools. Describe how you will implement
marketing and promotional activities that allow you to
reach your goals.
One other word of advice dont get so caught up in
preparing a perfect business plan that you never begin
to consult and perform billable services. Dont let the
business plan be an obstacle to taking first steps to
initiate your business. It can, and should, routinely be
revised and updated.
in a consulting business is likely to be your own professional malpractice, which you cant escape by operating
in a corporate entity.
There are a couple of practical downsides to operating
as a proprietor, too. First, many potential clients will only
want to contract with a consultant who is operating as
either a corporation, limited liability company (LLC) or
limited liability partnership (LLP). They are concerned
that the IRS might later interpret the relationship with the
consultant as an employment relationship rather than an
independent contractor relationship, which would result
in the imposition of taxes and penalties. Second, many
clients just perceive that a person operating in a corporation or LLC is more professional. Its not the reality, but it
is the perception of some.
To address the legal and practical downsides of operating
as a sole proprietor, you may want to structure your
consulting business as a corporation, LLC or LLP. If you
set up your business as a corporation, it is probably best
to apply with the IRS to be an S-corporation, because
if you set up as a regular corporation you will be taxed
as a professional service corporation, for which higher
tax rates apply at the corporate level. If you set up as an
S-corporation, all income tax issues flow-trough to you
as an individual, but you still have the protection of a
corporate entity.
An LLC or LLP provides the same kind of liability protection as a corporate entity as well as the flow-through of
income tax issues that exists with the S-corporation. LLCs
and LLPs are a bit more flexible than S-corporations, and
require less administrative effort to keep up-to-date will
legal compliance requirements.
Setting-up your business in corporate, LLC or LLP form
could offer you some additional tax planning flexibility,
too, especially when it comes to issues related to salaries,
distributions, and employee benefits.
In short, keep your business structure as simple as
possible, especially as you are starting out. But be aware
that you may have greater success building your business
if you set it up in a corporate, LLC or LLP legal structure
relatively early in the life of your business.
can provide your clients with efficient service and professional-looking work product.
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Here are just a few of the issues you will need to learn
about: Federal income tax and payroll taxes (FICA);
federal self-employment tax; state and local income
taxes; state and local sales taxes; federal and state
unemployment insurance programs and related payroll
taxes; state workers compensation programs; local
business licenses or permits; assumed name authorizations. Each of these areas should be studied so that
you understand your compliance obligations before
you are forced to learn the hard way by getting
caught out of compliance.
Some states may also have requirements for minimum
professional liability insurance coverage for your new
consulting business. As you set up your entity and
register with state authorities, be sure to confirm your
obligations for coverage.
Also, some states may have registration or certification
requirements for those who perform consulting services
in your particular field. You will want to make sure that
you comply with these requirements before starting out.
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Consultants Mall
www.consultants-mall.com
Find new ways to connect with people that can help you
grow your business. Stay active in business and industry
associations related to consulting and, more specifically, to
the field in which you specialize.
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