10 Steps to Starting a Business
Starting a business involves planning, making key financial decisions and completing a series of legal activities. These 10 easy steps can help you plan, prepare and manage your business.
Step 1: Write a Business Plan
Are you interested in starting a business? Creating a business plan is one of the most important steps you will take because the plan serves as your road map for the early years of your business. The business plan generally projects 3-5 years ahead and outlines the route a company intends to take to reach its yearly milestones, including revenue projections. A well thought out plan also helps you to step-back and think objectively about the key elements of your business venture and informs your decision-making on a regular basis.
Step 2: Get Business Assistance and Training
Take advantage of free training and counseling services, from preparing a business plan and securing financing, to expanding or relocating a business.
Step 3: Choose a Business Location
Choosing a business location is perhaps the most important decision a small business owner or startup will make, so it requires precise planning and research. It involves looking at demographics, assessing your supply chain, scoping the competition, staying on budget, understanding state laws and taxes, and much more.
Here are some tips to help you choose the right business location.
Determine Your Needs
Most businesses choose a location that provides exposure to customers. Additionally, there are less obvious factors and needs to consider, for example:
- Brand Image – Is the location consistent with the image you want to maintain?
- Competition – Are the businesses around you complementary or competing?
- Local Labor Market – Does the area have potential employees? What will their commute be like?
- Plan for Future Growth – If you anticipate further growth, look for a building that has extra space should you need it.
- Proximity to Suppliers – They need to be able to find you easily as well.
- Safety – Consider the crime rate. Will employees feel safe alone in the building or walking to their vehicles?
- Zoning Regulations – These determine whether you can conduct your type of business in certain properties or locations. You can find out how property is zoned by contacting your local planning agency.
Evaluate Your Finances
Besides determining what you can afford, you will need to be aware of other financial considerations:
- Hidden Costs – Very few spaces are business ready. Include costs like renovation, decorating, IT system upgrades, and so on.
- Taxes – What are the income and sales tax rates for your state? What about property taxes? Could you pay less in taxes by locating your business across a nearby state line?
- Minimum Wage – While the federal minimum wage is $7.25 per hour, many states have a higher minimum. View the Department of Labor’s list of minimum wage rates by state.
- Government Economic Incentives – Your business location can determine whether you qualify for government economic business programs, such as state-specific small business loans and other financial incentives.
Is the Area Business Friendly?
Understanding laws and regulations imposed on businesses in a particular location is essential. As you look to grow your business, it can be advantageous to work with a small business specialist or counselor. Check what programs and support your state government and local community offer to small businesses. Many states offer online tools to help small business owners start up and succeed. Local community resources such as SBA Offices, Small Business Development Centers, Women’s Business Centers, and other government-funded programs specifically support small businesses.
The Bottom Line
Do your research. Talk to other business owners and potential co-tenants. Consult the small business community and utilize available resources, such as free government-provided demographic data, to help in your efforts.
Step 4: Finance Your Business
Find government backed loans, venture capital and research grants to help you get started.
Step 5: Determine the Legal Structure of Your Business
Decide which form of ownership is best for you: sole proprietorship, partnership, Limited Liability Company (LLC), corporation, S corporation, nonprofit or cooperative.
Step 6: Register a Business Name
Naming your business is an important branding exercise, but if you choose to name your business as anything other than your own personal name then you’ll need to register it with the appropriate authorities.
This process is known as registering your “Doing Business As” (DBA) name.
What is a “Doing Business As” Name?
A fictitious name (or assumed name, trade name or DBA name) is a business name that is different from your personal name, the names of your partners or the officially registered name of your LLC or corporation.
It’s important to note that when you form a business, the legal name of the business defaults to the name of the person or entity that owns the business, unless you choose to rename it and register it as a DBA name.
For example, consider this scenario: John Smith sets up a painting business. Rather than operate under his own name, John instead chooses to name his business: “John Smith Painting”. This name is considered an assumed name and John will need to register it with the appropriate local government agency.
The legal name of your business is required on all government forms and applications, including your application for employer tax IDs, licenses and permits.
Do I Need a “Doing Business As” Name?
A DBA is needed in the following scenarios:
- Sole Proprietors or Partnerships – If you wish to start a business under anything other than your real name, you’ll need to register a DBA so that you can do business as another name.
- Existing Corporations or LLCs – If your business is already set up and you want to do business under a name other than your existing corporation or LLC name, you will need to register a DBA.
Note: Not all states require the registering of fictitious business names or DBAs.
How to Register your “Doing Business As” Name
Registering your DBA is done either with your county clerk’s office or with your state government, depending on where your business is located. There are a few states that do not require the registering of fictitious business names
Step 7: Get a Tax Identification Number
An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN. You may apply for an EIN in various ways. You must check with your state to determine if you need a state number or charter.
Step 8: Register for State and Local Taxes
In addition to business taxes required by the federal government, you will have to pay some state and local taxes. Each state and locality has its own tax laws. The links below provide access to key resources that will help you learn about your state tax obligations. Having knowledge of your state tax requirement can help you avoid problems and your business save money. The most common types of tax requirements for small business are income taxes and employment taxes.
Income Taxes
Nearly every state levies a business or corporate income tax. Your tax requirement depends on the legal structure of your business. For example, if your business is a Limited Liability Company (LLC), the LLC gets taxed separately from the owners, while sole proprietors report their personal and business income taxes using the same form. Consult the General Tax Information link under your state for specific requirements.
Employment Taxes
In addition to federal employment taxes, business owners with employees are also responsible for paying certain taxes required by the state. All states require payment of state workers’ compensation insurance and unemployment insurance taxes. The following states/territories also require a business to pay for temporary disability insurance:
Step 9: Obtain Business Licenses and Permits
Get a list of federal, state and local licenses and permits required for your business.
Step 10: Understand Employer Responsibilities
Learn the legal steps you need to take to hire employees.