Creating a business of your own can be challenging. You will need adequate funding, time, personal support, and professional support to move forward successfully with your entrepreneurial dreams.
Step 1: Choose the Right Business Idea
The first step toward business ownership is deciding what kind of business to start. Search for an idea that suits your interests, your personal goals, and your natural abilities. This will help you stay motivated when the going gets tough and will greatly improve your odds of success.
Step 2: Plan Your Business
Successful businesses are built through careful planning. Before committing a significant amount of money and other resources toward your business, critically analyze your idea, and create a game plan. At a minimum, you should have good answers to the following questions.
1.1 Business Name
Business name is one of the most important and challenging steps in getting started. You want to choose a brand name resonates with your customers and is available in your state and as a URL.
1.2 Product Development
What problem does your business solve? What will set your product or service apart from the competition?
1.3 Sales & Marketing
Who are your potential customers? How will you get their attention and convert them into buyers?
1.4 People and Partnerships
What roles will you need to hire and what professional relationships will you need to form to succeed?
1.5 Financial Planning
How many clients or sales will you need to break even? How much money will it take to get there, and where will you get the funding?
Step 3: Form Your Business
Registering your company as a legal business entity — such as an LLC, corporation, or nonprofit — has two major advantages:
A limited liability company (LLC) combines the personal asset protection of a corporation with the tax flexibility of a partnership or sole proprietorship. Most small businesses prefer the LLC structure due to its easy maintenance and favorable tax treatment.
A corporation is a separate legal entity that is owned by its shareholders. Corporations have more formal regulations than LLCs and tend to be more attractive to investors. Most large companies fall under the corporate category.
A nonprofit organization is one that is funded by donations instead of investors. Nonprofits are typically created to further a social cause and are exempt from paying taxes.
If you choose not to register your company as a business entity, you will be held personally responsible for the debts and liabilities of your business.
In addition, partnership and sole proprietorship business owners may need to file a DBA, sometimes known as a “fictitious name,” “trade name,” or “assumed name” depending on the state. A DBA IS NOT A BUSINESS STRUCTURE.
Note that three states (Kansas, New Mexico, and South Carolina) do not have DBAs.
Step 4: Register for Taxes
With limited exceptions, most businesses require an Employer Identification Number (EIN), also known as a Tax ID Number. An EIN is used to identify a business in its federal tax filings. Without an EIN, you can’t hire employees or open a business bank account.
State taxes that may also apply to your business:
If you are selling a physical product, you will typically need to register for sales tax in your state. Five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) do not have sales tax.
If you hire employees, you will typically have to register for Unemployment Insurance Tax and state income tax withholding on behalf of your employees.
Step 5: Create Business Banking and Credit Accounts
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
You can protect your business with these two steps:
1. Opening a business bank account:
2. Getting a business credit card:
Step 6: Set Up Accounting
An accounting system helps track the performance of your business and simplifies annual tax filings.
Step 7: Obtain Permits and Licenses
To operate your new business legally, you will need to comply with federal, state, and local government regulations. In many cases, this involves obtaining one or more business permits and/or licenses. For example, a restaurant will likely need health permits, building permits, signage permits, etc.
Step 8: Get Insured
Business insurance helps you manage risks and focus on growing your business. The most common types of business insurance you should consider are:
General recommendation is that all small businesses, including home-based businesses, purchase a general liability policy. Businesses selling professional advice or services, such as consulting and accounting firms, should also consider a professional liability policy.
Each state has its own workers’ compensation requirements and often depends on the number of employees a business has.
Step 9: Define Your Brand
The strongest and most memorable businesses are built on a solid brand. When developing your brand consider:
Your business NAME along with a unique LOGO is the cornerstone of good branding and a successful business.
Step 10: Establish a Web Presence
A professional website is critical to the long-term success of your business, regardless of industry. A website allows potential customers to find your business online and discover the products or services you offer, and it also enhances your business’s credibility.
In addition to a website, you should also consider other avenues for promoting your business online:
While starting a business is difficult, you must also be ready to maintain that business for years to come. We have partnered with a variety of resourceful companies and organizations that are dedicated to helping set up and grow small businesses like yours.