It’s never been easier to start a business. Still, it’s a lot of work and there’s so many different things you need to do before you even get started! Here is a full guide on how to start your own business.
Before You Start Your Business
There are so many things you need to do before you start putting your ideas into action. Before jumping right in, make sure you know what you’re getting yourself into!
Related: 15 THINGS YOU SHOULD KNOW BEFORE STARTING A BUSINESS!
Get a Vision for Your Business
Before you get started, it’s important for you to have a vision for what you want your business to do.
I recommend jotting your ideas down on a blank sheet of paper or creating a vision board!
What problem are you trying to solve? Why will people want to buy your product or service?
These are some questions you will need answers to before investing your time and money.
You will also want to lay out what your long-term and short-term goals are for your business.
Whether they are financial goals or growth goals, whatever, it’s important to have goals and set deadlines to hold yourself accountable.
Research, research, research. Your market, your target customers, your specific business niche, and everything that goes into running your particular business.
I cannot stress the importance of researching enough. It can be the difference between success and failure.
This can help you determine whether there is a need or a want for your idea.
You can do research in a multitude of ways including surveys, focus groups, questionnaires, and interviews. There are also many resources on the internet to help you get the information you need.
Market research will tell you whether there is opportunity for your idea to turn into a successful business.
In order to get a good sense of your market, you will need to research demand, market size, location, economic indicators, market saturation, and pricing.
This is a great way to gather information on your potential customers and the market you are planning to sell in.
You will also want to look into the competition and see what they’re doing and how you can stand out.
This information can be used to help give your business a competitive advantage.
You’ll also need to research everything that goes into running a business in your specific industry and niche.
Create a Business Plan
Once you get a vision for your business and do the research you’ll want to put all of your ideas on paper.
The business plan is a road map that will lay out where your business is going and the things you will need to do to get it there.
There are many different business plan formats that you can use.
I personally think format matters less than just making sure you have all the information included in a way that’s both clear and understandable.
Your business plan will need to cover all the moving parts of your business:
- Executive Summary: This will be a paragraph that summarizes your entire business plan as a whole.
- Company Description: Here is where you will talk about your company’s mission and values.
- Products & Services: Talk about what your product and/or service is, what sets it apart, and your profit margins.
- Business Operations: Describe what resources you will need to start your business including the building if applicable. You will also talk about your supplies, distributors, and logistics here.
- Growth Plan: Cover your company’s goals, the direction you see your business going in the future, and how you plan to scale your business.
- Legal: Describe your legal structure and any licensing and legal requirements your business will need to follow.
- Team: List the owners and their responsibilities, managers and employees, any strategic partnerships that you may have, and where you will turn to for advice and support.
- Marketing Plan: Include the market research you’ve done and what you’ve learned about your target market. This is also where you will talk about your advertising plan and how you plan to reach your potential customers.
- Financial Plan: Break down your finances and describe your start-up costs, how you plan to fund your business, sales forecasts, break-even analysis, projected profit & loss, and cash flow.
- Action Plan: This is an ongoing list of things you need to get done and next steps for your business.
- Appendices: If you have any supporting information that you didn’t include in the plan such as pictures, charts, or graphs, you can put them here. Make sure to reference them where they are relevant.
I’ve put together a full guide to help you put your business plan together. You can find it with the link below!
PUT YOUR BUSINESS PLAN TOGETHER WITH THE ULTIMATE BUSINESS PLAN GUIDE!
Now that you have a plan for your business it’s time to put it into action with funding!
This is one of the first important financial decisions you will have to make in your business.
If you already have your business plan together, you probably have a good idea on how much money you will need and where the money will be coming from.
How you come up with the money could determine how your business is structured and run.
You might have enough money in your savings, but if not, you’ll need to either raise money or borrow it.
There are benefits and pitfalls from each funding option.
This can look like turning to family and friends for money or tapping into your savings or 401(k).
With this option, you get to maintain the most control over your business, but all of the risk falls solely on you.
Venture Capital Investors
Investors can give you money to help you start your business, usually in exchange for a percentage of ownership and an active role in the company.
Seeking funding through venture capitalists is most common with corporate structures.
Investors may be less likely to invest in your company if you are choosing a legal structure other than corporation.
This form of funding can take the financial burden off of you, but will give you less control over your business.
You can raise money from a large group of people.
These people usually aren’t investors looking for a return on their money, instead they expect some sort of gift from your company as a thanks for their contribution.
The gift can be anything from one of your products, a special perk, or getting recognition for their donation.
This is a very low risk option for business owners because if the business fails, they are usually under no obligation to repay the crowd-funders.
Every crowdfunding platform is different, so make sure you understand the financial and legal obligations required before going this route.
Small Business Loan
If you would like to keep full control of your business, but don’t have the funds to invest, a small business loan is a great option for you.
You can get these through banks and credit unions.
Having your business plan, financial projections, and expense sheet available will increase your chances of being approved for the loan.
Rates vary at each institution so make sure you do your research and compare rates before choosing where you will get the loan through.
The downfall with this option is if your business is seen as too-risky, you may have significant difficulty being approved for a loan.
Your legal structure will affect your personal liability, how much you will pay in taxes, and the paperwork you will need to file.
You need to choose your structure before filing with your state.
Choosing the right legal structure from the start is crucial.
Changing it later on can cause complications and tax penalties. There may even be restrictions based on where you are located.
Here are the business structures you can choose from.
This is the easiest type of business to start as you are automatically considered a sole proprietorship if you conduct business without registering.
Because there is no legal separation between you and your business, you can be held personally responsible for your business’s debts and legal liabilities.
This type of structure is recommended for smaller and lower-risk businesses.
A partnership is the simplest structure for two ore more people to own a business together.
There are two types of partnerships:
- Limited partnerships (LP) have one general partner with unlimited liability and one or more partners with limited liability and limited control of the business.
- A limited liability partnership (LLP) is similar, but gives limited liability to every owner protecting them from the company’s liabilities.
Limited Liability Company (LLC)
This business structure gives you the best of both worlds between a sole proprietorship and a corporation.
You are protected from your business’s liabilities, but you can avoid corporate taxes by filing as a pass-through entity.
Corporation (C Corp)
A corporation, also known as a C Corp, is a separate legal entity from its owners and can be held legally liable.
This structure provides the strongest protection from personal liability, but is also the most costly and requires extensive record keeping.
An S Corporation, also referred to as a Small Business Corporation, is a special structure designed to avoid the double taxation that occurs in C Corps.
You can file as a pass-through entity to avoid corporate tax rates.
There are many restrictions for businesses and owners to qualify to file as an S Corp.
Also known as a benefit corporation, B Corps are a for-profit corporation that not only make financial profit, but produce some sort of public benefit.
It is a private certification for businesses that do good public work.
They are taxed the same as corporations, but meet higher standards of purpose, accountability, and transparency.
A close corporation is a privately held company similar to a B Corp.
The main difference is that they are exempt from many of the formal rules that govern corporations.
Sometimes known as a 501(c)(3) corporation, Non-profits are formed for the purpose of charity, education, religion, science, or literary work.
These companies don’t pay income tax on their profits because of their contribution to the public good.
Non-profits must follow guidelines similar to corporations along with special rules for what they do with the money they earn.
Also known as co-ops, cooperatives are privately owned businesses operated by those who benefit from its products and services.
These companies are formed to meet the needs and objectives of its members.
Not every legal structure will work with the type of business you are looking to start.
Make sure to do your research on your specific business to find out which one is the right one for you.
You can research online and reach out to people who have started similar businesses to see which legal structure they chose.
Name Your Business
You’ve probably already thought of what you would like to name your business. Maybe you already have a name picked out.
But if you still haven’t decided on what you would like your business name to be, it’s time to name it!
Try to pick a name that is relevant to the type of business you are going to open and that matches your brand.
One thing that really helped me with choosing business names was looking up similar businesses in the industry all over the country and seeing what their names were.
I looked at what other people were doing and tried to come up with a name that stood out and represented where I wanted to go with my business.
Another thing you could try is writing down a list of words associated with your industry and specific business niche and try to mix and match them.
*Make sure the name you choose is easy to pronounce and spell.*
It’s not easy to pick the perfect name, but try not to overthink this too much.
Choosing the right business’s name is important, but it will only take you so far.
Once you have chosen a business name, you’ll want to make sure the name is available.
Register Your Business
Once you’ve decided on the name, the next step in starting a business is register your business.
Firstly, you’ll need to find out whether you will actually need to register your business.
This will be based on the business structure you use and the location(s) you conduct business in.
Typically, if you are a sole proprietor and you are conducting business under your legal name, you will not have to register.
Because requirements vary state to state, you will need to see what your state requires.
Keep in mind, you might miss out on tax benefits and legal protection by choosing not to register your business.
Register with Federal Agencies
In most cases, you won’t need to register with the federal government to become a legal entity.
Some businesses will file federally to register a trademark or for tax-exempt status.
Register with State Agencies
If your business is an LLC, Corporation, Partnership, or Non-Profit Corporation, you’ll more than likely need to register in the state(s) where you conduct business.
Many states have made it really easy and allow you to register online. Others still require you to file paper documents through the mail.
It varies state to state, but most will require you to file with the Secretary of State or a Business Bureau or Agency.
Get a Registered Agent
A registered agent service will receive official documents and legal notifications on behalf of your business and must be located in the state where you registered.
Most businesses prefer to use a registered agent service than to fill this role themselves.
File for Foreign Qualification
In addition to registering with your state, you will have to file for foreign qualification if you’re planning to conduct business in multiple states.
This applies to you if your business is an LLC, Partnership, Corporation, or Non-Profit Corporation.
You can do this by submitting a Certificate of Authority, also known as a Statement & Designation by a Foreign Corporation, through the additional state’s Secretary of State’s office.
State Documents and Fees
Registration fees vary based your structure and state, but are usually no more than $300.
Here are the main documents that you are typically required to file for each legal structure:
- LLC: Articles of Organization & Operating Agreement
- Limited Partnership: Certificate of Limited Partnership & Limited Partnership Agreement
- Limited Liability Partnership: Certificate of Limited Liability Partnership & Limited Liability Partnership Agreement
- Corporation (any kind): Articles of Incorporation & Bylaws or Resolutions.
Register with Local Agencies
Depending on your city, county, and type of business, you may need to file for licenses or permits with your county or city governments.
You may also need to file a DBA (doing business as) with your city or county depending on where you are doing business.
Business Registration Requirements
It’s possible that you will need to file additional documentation, such as an initial report, with the state tax board.
Usually these filings need to be done within 30-90 days of registering your business with your state.
You can check with your local tax office or franchise tax board to see if these filings apply to you and your business.
Apply for Your Tax IDs
Your tax ID numbers, also known as your Employer Identification Number (EIN), is like a social security number for your business.
This is how your business will be taxed. You can apply for your EIN through the IRS.
Depending on the state you are doing business in, you may only need to file at the federal level, but some states require you to apply for a state tax ID as well.
Make sure you do thorough research on your state’s requirements. You need a federal tax ID if your business:
- Is a corporation or partnership
- Pays employees
- Files tax returns for employment, excise, alcohol, tobacco, or firearms
- Works with certain types of organizations
- Uses a Keogh Plan (tax-deferred pension plan)
Apply for Licenses and Permits
Many businesses need to file for licenses and permits through federal and state agencies, but requirements vary based on what type of business you start and where you are start your business.
Some business activities are regulated by the federal government and will require you to file licenses or permits at the federal level.
These federally regulated activities include:
- Firearms, Ammo, & Explosives
- Fish & Wildlife
- Commercial Fisheries
- Maritime Transportation
- Mining & Drilling
- Nuclear Energy
- Radio & Television Broadcasting
- Transportation & Logistics
Permit and license requirements at the state, county, and city levels largely depend on what type of business you are starting and your business location.
States typically regulate a wider range of business activities than at the federal level.
Some common locally regulated businesses include:
- Dry Cleaning
- Vending Machines
Fees will vary based on the type of license or permit, your specific type of business, and your location.
Make sure you’re aware of the expiration dates of the licenses and permits, because some of they may expire after a certain amount of time.
Do thorough research on the requirements in your country, state, local government, and business industry.
Open a Business Bank Account
Once your business is ready to start accepting money, it’s time to open a business bank account.
You can open a business bank account once you’ve obtained your federal tax ID number.
It is SO important to keep your business’s finances separate from your personal finances.
This will keep you protected and legally compliant. It will also make it so much easier to track your revenue and expenses.
Some documentation you will need to bring to the bank with you to open your business bank account include:
- Employer Identification Number (EIN)
- Business’s Formation Documents
- Ownership Agreements
- Business License
It’s important to note that some banks may require more than just these documents.
It may be a good idea to give the bank a call ahead of time and ask which documents you will need to open a business bank account.
Start Your Business
Starting a business is a big decision that involves a lot of planning and legal decisions.
There is so much more that goes into starting business.
These are just a few of things you will need to think about and complete in the process.
Above all, make sure to do thorough research on your industry’s standard’s and the requirements of your city, state, and country.
Consider reaching out to someone who has started a similar business for advice on how they got started.
I hope this article helped you and gave you a good idea of what goes into the first steps of starting a business.
If you’ve started a business or plan to start a business, we’d love to hear about it in the comments below!
If you have any advice or words of encouragement for those just getting started, please leave them below!
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*Disclaimer: This article is not meant to be taken as professional legal or financial advice. I am not a tax or legal professional and am not liable for misinformation or missing information in the above article. For financial and legal advice, please contact an accountant, financial advisor, or lawyer.*