You’ve made the decision to start a business, but you have no idea on where to start. Follow these 10 steps to get started.
Step 1. Write a Business Plan
The first step to starting your own business is writing a business plan. A business plan is a roadmap to your business’s future. It will help you determine how viable your idea is and will allow you to track your progress and growth.
Step 2. Write a Marketing Plan
Your marketing plan is one of the most important pieces of your business plan. A marketing plan helps you determine what your customers want and need from your company. As part of your marketing plan, take an honest look at strengths and weaknesses of you and your competitors. You want to develop marketing strategies that exploit your strengths and fill a need that your competitors aren’t filling.
Step 3. Choose a Business Location
Once you have your business plan and know that your business is viable, it’s time to choose your location. There are several factors to consider when choosing your business location.
Income taxes, sales taxes, and business regulations vary greatly from state to state, so you will want to see if your state is small business friendly. Every year, the Small Business & Entrepreneurship Council releases the “Small Business Policy Index”, which examines which states are friendly to small businesses. The top three states for small businesses in 2017 are Nevada, Texas, and South Dakota.
Within your city, you will also have to consider several factors, such as rent, workforce availability, local taxes, regulations, and government economic incentives. You’ll also have to ask yourself if the neighborhood you’re considering matches your company’s image. You’ll have to consider how convenient the location is for your staff and customers.
Step 4. Finance Your Business
When starting a new business, there’s always the question of funding. If you don’t have the means to fund your business yourself, you can bring in partners to help lighten the burden, take out a loan from the bank, use credit cards, borrow money from your friends and family, or look into state and federal funding programs. You can even turn to crowdfunding, which is becoming increasingly popular, thanks to websites like Kickstarter.
Step 5. Determine the Legal Structure of Your Business
You’ll have to decide on a legal structure for your business to ensure that you’re fulfilling your tax and reporting obligations. You can choose the legal structure based on your business’s needs.
A sole proprietorship is the most common structure chosen when starting a business because it’s the simplest. In a sole proprietorship, you own the company and are solely responsible for its assets and liabilities.
A partnership is a business owned and operated by two or more people. Each partner shares the profits and losses from the business, and each partner must contribute to every aspect of the business, including money, property, labor, and skill.
A corporation is one of the most expensive and complex business structures to start, so it’s generally only suggested for large established businesses with multiple employees. A corporation is an independent legal entity owned by shareholders. Because it is an independent entity, the corporation is liable for the debts and other obligations of the business.
Limited Liability Company (LLC)
An LLC combines the limited liability features of a corporation with the tax efficiencies and flexibility of a partnership. Like a partnership, the business is not taxed separately. Instead, the profits and losses “pass through” to the owners, who then report the profits or losses on their personal tax returns.
An S Corporation is a special type of corporation, formed through an IRS election, to avoid the double taxation that corporations are subject to. Profits and losses are “passed through” to shareholders, who then report the profits or losses on their personal tax returns. There is one major caveat to forming an S Corporation – any shareholder who works for the company must pay themselves a “reasonable compensation”.
A cooperative is owned and operated for the benefit of those using its services. Any profits and earnings generated are distributed among its members, who all have voting powers.
Step 6. Register Your Business Name
Before you register your business name, spend some time thinking and choosing the perfect name for your business , if you haven’t already. Your business name will be the first impression of your company for many potential customers, so you want it to concisely and accurately describe your business and culture.
If your business name is not your legal name, if you’re a sole proprietorship, or the legal name associated with other business structures, you’ll have to register your “Doing Business As” (DBA) name , also called a fictitious name or trade name. Depending on your state, you’ll either register your DBA name through your county clerk’s office or with your state government.
Step 7. Apply for an Employer Identification Number (EIN)
If you plan to hire employees, you’ll have to obtain an EIN. The IRS requires most businesses to obtain an EIN to identify employers’ tax accounts. You can register for an EIN online, by fax, or by mail, depending on how quickly you want your EIN.
If you apply online, you’ll receive your EIN immediately after completing the application. Applying by fax may take up to four business days. If you apply by mail, you may wait up to four weeks before receiving your EIN.
Step 8. Register for State & Local Taxes
Every state has its own income, sales, and employment taxes, so you’ll have to register with your state to pay these tax obligations. You’ll have to pay workers’ compensation insurance and unemployment insurance taxes. The following states and territory even require you to pay for disability insurance for non-work related injuries or illnesses:
Rhode Island, and
Step 9. Obtain a Business License
Almost every business needs some form of license or permit to operate within your state, but the type of license or permit you need will depend on where your business is located, what industry you’re operating in, and what government rules apply to your business.
If you’re participating in an industry that’s regulated by the federal government, such as selling alcohol or firearms, you may also have to obtain a federal license to operate your business.
Step 10. Understand Your Responsibilities as an Employer
If you’re going to hire employees, you have certain responsibilities to your employees and federal and state governments.
Paying Your Employees
You must pay your employees at least the minimum wage. The current federal minimum wage is $7.25 an hour, but some states have their own minimum wage laws. If your state doesn’t have a minimum wage, or if it’s less than the federal minimum wage, abide by the federal minimum wage. If your state’s minimum wage is higher than the federal minimum, pay your employees your state’s minimum wage or higher.
You must pay your employees time and a half for all hours worked over 40 in a week, unless they are categorized as an exempt employee. An exempt employee is a salaried employee in a white collar position – such as a managerial, professional, or supervisory role. Under federal law, you must pay exempt employees time and a half for hours worked over 40 in a week if they make less than the minimum weekly salary.
With each paycheck, you must provide your employees with a paystub. The paystub must show their gross pay, deductions and withholdings, and net pay for the pay period and the year-to-date. You must also provide employees with a W-2 each year. The W-2 is a yearly statement of their earnings, deductions, and withholdings.
There are some benefits that you are required to provide for your employees under federal law, including social security taxes, unemployment insurance, workers’ compensation insurance, disability insurance, and Family and Medical Leave.
You must provide your employees with a safe and healthy workplace, according to the Occupational Safety and Health Act (OSHA).