You have your business idea and you are eager to get your new company up and running. Or, maybe you have been approached by some interested investors with an idea that you didn’t realize could be profitable. The bottom line is that you need to start a business but you’re not sure where to begin. Starting a business is as straightforward or complex as your business needs. And each business’ needs will depend on the type of company that it is, the number of compliance and licensure programs that your company is required to obtain, the fees, paperwork, and other items that are necessary for starting that business. If you’re not sure how to kickstart this process, we’ve provided an overview of things to consider when starting a new business and provided some steps to help you go about it:
First Steps Starting a Business
Where you are in the business preparation process will determine where you need to start.If you don’t yet have a clear business idea, that is the first thing you need to sort out. You can search through random business ideas or you can read the market and determine what product or service makes the most sense to. Once you have an idea, you will need to map out what your business will look like and how you are expecting it to operate. If you already have a business idea, you can begin to collect the necessary information to start that business. Here are some basic items that you’ll want to start developing:
- Your business name
- A brand or brand identity
- Where your business will operate
- How many employees your business will have
- How much seed capital you will need
- Market and competitor research
- Sourcing out a physical location
- Becoming licensed or compliant
If starting a business seems overwhelming, you can always consider outsourcing these necessary tasks to a business advisor or registered agent to complete this paperwork on your behalf.
Choosing Your Business Structure
Choosing a business structure is an important step. It will classify your business for legal and tax purposes while dictating important details like how you can obtain a business bank account, how to file taxes, business management, hiring practices, and more. Identifying your overall business structure from the get-go makes your business start-up a lot easier. Here is a brief overview of common business structures in the US:
A sole proprietorship is a business that is owned by one individual. This type of business structure is a pass-through business for tax purposes, which means that the income and losses are reported on the owner’s personal income. A sole proprietorship can “Do Business As” another company name without needing to becoming incorporated.
Limited liability company (LLC)
A limited liability company (LLC) is a company structure that allows those who are owners or investors to have limited liability for when the company experiences debts or liabilities. This means that the personal assets of all invested in the company are safe, and they can still earn profits. LLCs can decide to file as pass-through (on each of the owners’ personal taxes) or as an S Corp. An LLC will need to register with the state where they do business, pay the fees, and file an Articles of Organization in order to file as an S Corp.
A corporation is the upper-most echelon of business structure. A corporation is considered its own legal entity and can be owned by an individual, another entity, a foreigner, a foreign entity, and even an LLC. Corporations file their own corporate taxes and receive an employer identification number (EIN) from the IRS for tax purposes (although they can file as an S Corporation if they are eligible). Corporations are in a cheaper tax bracket but sometimes might be double taxed. Corporations also have much stricter business management requirements, as they are required to hold annual meetings, have a Board of Directors, and file an annual report. Articles of Organization, state-specific legal paperwork, and fees are required to operate as a Corporation.
Getting Up and Running
Once you have decided on your business type, the business structure, and the business name, you can move on to the next steps. When you’re ready, your business will also need to consider
- How it will be conducting payroll
- Online banking
- Securing company email and productivity apps
- Buying a domain and web services
- Sending out advertising and marketing materials
- Seeking lead avenues or prospects
- Securing a phone number
It’s first important that you establish what needs to be done within the state in which the business operates. Consider hiring a registered agent who can help sort out these requirements and ensure you are compliant.
Seeking Seed Capital
You’re just about ready to start but it is likely that you need a little more financial support to get your company off the ground. While it helps to have professional services that support your business, it is most important to secure funding so that you can confidently make new business connections and inform those connections that your business is ready and able to grow. There are several different ways to secure funding for your business. These include:
- Your own personal investments
- Venture capital
- Angel investors
- Bank loans
- Love money (which comes from friends or family)
- Personal investment
- Business incubators or accelerators (which focus on tech)
- Government grants/subsidies
When approaching each of these capital opportunities, you’ll need to consider how your business will be able to generate money for that investor, whether they are interested in getting that money back or not. After all, even if you or your family member is the investor, you or they will be eager to see your company succeed. Be sure to prepare a business proposal and secure a business name when you are seeking outside funding. You’ll also need to prove to investors that their personal assets are protected by limited liability.