Corporations — both large and small — are looking to “outsource” a lot of internal functions to outsiders. If you’re thinking about setting up a consulting business, here are 12 things you will need to get started:
1. A federal tax ID number
The IRS says you can use your Social Security number as a federal tax ID number, but I wouldn’t if I were you. You will have to give this number out to all of your clients, subcontractors and employees (if you have any). Go to the IRS Web site, at http://www.irs.gov , and fill out IRS Form SS-4. Better yet, have your accountant do it for you so no mistakes are made. Most accountants I know won’t charge for this service.
2. A state business license
Register for a state tax identification number, sometimes called a “business license.” Some states require you to collect and pay sales tax when you provide consulting services — check with your accountant to learn your state’s rules. Even if they don’t, you still have to register as a business with your state tax authority (and sometimes also with your city or town tax authority). To find your state tax registration form, go to http://taxsites.com/state-links.html  to find your state tax authority’s Web site — once there, click on the “Forms and Publications” link, then the “Business Registration” link. Read the form thoroughly and call your state tax authority or a local accountant with any questions before you fill out the form online.
3. A corporation or limited liability company (L.L.C.)
A corporation or L.L.C. can give you tax breaks and will make you look like a “real” business. Many corporate clients will want you to set up one of these anyway, so you might as well do it now. A good lawyer or accountant can do the job for about $500. Make sure to sign all documents as a representative of your company.
4. A home office
The home-office deduction is one of the biggest tax benefits self-employed people have. Set aside a spare bedroom in your home, put nothing but business equipment in that room, and make sure it’s your only office. Be careful about working too much at your clients’ offices, as the IRS may deny your home-office deduction if it’s not the place where your principal consulting activities are conducted.
5. A good accountant and lawyer
During your first few months in business you should spend 100 percent of your time generating business leads, selling your consulting services to prospective clients and doing work for clients. You do not have the time to become a legal and tax expert. Hire a good accountant and a good business lawyer and let them “spoon-feed” you information when you need it. Your lawyer should review every contract a client asks you to sign. Talk to your accountant at least monthly; don’t wait for tax season, as he or she will be too busy.
6. A supportive spouse or “significant other”
Be honest and direct about the choice you have made, and make sure your spouse or significant other is on board. If they can’t or won’t follow you where you need to go, ask your business lawyer for a referral to a local divorce professional. Better to break up now than face years of misery and heartache from an unhappy or passive-aggressive partner who loved you more the “way you were” than the way you are now.
7. The right contract forms
If you are working for individuals or small businesses, chances are they don’t have a consulting agreement form. You will need to develop one, along with the following standard forms: a “statement of work” (SOW) or proposal letter spelling out what services and deliverables you will provide, what you will charge for those services and deliverables, the timetable for delivery, and when you expect to get paid; a confidentiality or nondisclosure agreement (this should be “mutual” to protect both your information and your client’s); and a subcontract agreement (in case you have to farm out certain work to another professional). A good business attorney can prepare these for you for a fee of about one to two hours of their time.
If you are working mostly for larger corporations, you won’t need any of these forms except for the SOW or proposal letter. Your client will have contract forms of their own that they will ask you to sign — make sure to have your attorney review these.
8. A decent Web site
Do not create a “free” Web site on an online service that uses its own URL as the home page. Go to Network Solutions and register a URL that is simple and easy to remember. Have a professional build your Web site and do not scrimp on search engine optimization (SEO), as this is how many potential clients will find you. Create a profile with links to your site on some of the popular online services people use to find professionals, such as Craigslist.org and Elance.com.
9. A profile on LinkedIn
LinkedIn (http://www.linkedin.com ) is a social-networking site for professionals and a great way to build a network of contacts that can help you get business. For information on how to use LinkedIn, check out Jan Wallen’s e-book “LinkedIn in Seven Days or Less” at http://www.linkedinworks.com .
10. Information giveaways
To impress potential clients, you will need to convince them you are an expert in your field. The traditional “marketing brochure” containing just your biography, photo and contact information just doesn’t cut it anymore. Write articles for local newspapers, business periodicals and trade publications, then make photocopies of them and create a “binder” that you can give to prospective clients. Hire a graphic designer to create a professional-looking cover for your binder, and have them printed at Kinko’s so they look like a “real” publication. Even better, self-publish a short book (less than 100 pages) and give a signed copy to each prospect, lead and referral source. With today’s self-publishing technology, you probably can have 500 to 1,000 copies printed for less than $2,000. For information on self-publishing a book, see the all-time classic book The Self-Publishing Manual: How to Write, Print , and Sell your Own Book by Dan Poynter, which is now in its 16th edition.
11. A speaking “shtick”
One of the best ways for consultants to establish their expertise and get business is public speaking. Put together a list of 30- to 60-minute talks that relate to the work you do. For example, if you are a marketing consultant to businesses, create a talk on “10 Ways to Generate More Revenue in Troubled Times.” Then check your local newspaper or business periodical to learn about upcoming meetings of local business organizations that might be interested in what you have to say. Call their telephone number, ask to speak to their program director and volunteer to speak for free at a future meeting. Put together a PowerPoint presentation of your talk, and be sure to make copies for all attendees with your contact information clearly displayed on the cover page. Your name and telephone number should also appear at the bottom of each page. Be sure to post copies of your presentations on your Web site and LinkedIn profile.
Also, be sure to meet the senior officers of each organization for whom you speak, and ask for referrals to other local or regional organizations that may be interested in what you have to say.
12. A support network
I’m not a big believer in networking meetings — most of them are sheer wastes of your time — but the one thing you can find at these are “like-minded souls” who will spare you some time every once in a while as long as you’re willing to do the same. Find at least four or five people and meet with them regularly to get a reality check on where you are, how you’re doing, what will work and what (likely) won’t. It may save you from doing something stupid you will regret later.