1) Do Your Research
This is the time to contemplate your products or services. What is the need? Who is your competition? Start asking friends and family who would be in your target audience. Don’t give out too many “trade secrets” in the process, but chat casually and ask questions.
If you are creating a physical product, this is also the time to think about production. What products are needed to make your product? What special equipment would you need to buy to produce your product? How much is all of that going to cost? Is there enough margin there for you to make a profit?
2) Decide On Your Structure
Your next step in creating your business is deciding on your business structure. The 5 common business structures are Sole Proprietor, Partnership, Limited Liability Company (LLC), C-Corp, and S-Corp. Each structure has its pros and cons depending on your needs and the needs of your business. For more about the different structures, please see our posts from the week of August 8th.
3) Pick A Name
What’s in a name? Your business name can make or break your business before it even gets off the ground good. Your business name needs to:
• Be personal to you
• Speak to your ideal client
• Roll off the tongue
• Be easy to remember
Almost 10 years ago, our 3 teen daughters decided to start a small skincare line of sugar scrubs and assorted products. The girls really struggled with what to call their venture. They came to me for assistance. In looking for something personal to them, we took a mix of one of our dog’s names and the subdivision we lived in at the time. Callaway Hills was born. It’s a great example of using those 4 qualifications to come up with a great name.
4) Create a Plan
A business plan is essential to starting a new business, especially if you are seeking financing to begin your business. Your business plan contains items like how your business will be organized, the products or services you will be offering, and your marketing and sales projections.
5) Gather Funding
Now that your business plan is complete, it’s time to start gathering funding. What does that look like for your business? Do you have the funding in savings? Do you have family willing to invest in your business? Are you seeking commercial financing from a bank? Begin gathering your funding.
6) Set Up A Workspace
Your funding should now be complete. Now what? It’s time to decide where you will have your office. Are you going to have a home office? Are you going to rent a large office space? Does your business require a storefront? Is your business conducive to renting a shared co-working space?
7) Register With Your State
It’s time to get official! Your next step is to get registered with your state of residence/domicile. With most states this is a simple process that can be completed online with your state’s Secretary of State within a few minutes. Some states, TX being one of them, requires that paperwork be printed out and submitted by mail.
Regardless of what state you are in, the process is typically the same. Generally, the system will lead you through the process of checking to be sure you are not using the name of an existing business registered in your state. Then you will go through a series of questions about your business, personal information about the owner(s) and information concerning the business structure.
The final piece should deal with a registered agent. Different states have different rules about what constitutes a registered agent. For example, in South Dakota, you must use an organization from a list of state-registered agents. In Georgia, it can be anyone who is a property owner in the state. Most commercial registered agents charge an annual fee.
8) Gather Federal & State Tax IDs
The next step is to obtain federal and state tax ID numbers. Some of these numbers are going to be completely subjective depending on your state, your organizational structure and how your business operates. The one thing that is standard across the board is the need for a federal employer identification number (EIN).
Stepping on my soapbox here.
In my opinion, EVERY SINGLE legitimate business should have an EIN. Yes, it is completely LEGAL for a Sole Proprietor to use their social security number (SSN) in place of an EIN. Because your business numbers have to be reported on your W-9 to be shared with any business that pays you more than $600 in a calendar year, it is an absolute personal identity theft risk to be using your personal SSN. An EIN is free and can be obtained within minutes from the IRS.
Stepping off my soapbox now.
Back to the other kinds of numbers that you may need to obtain.
• State unemployment numbers
• State sales tax numbers
• State business registration numbers
• State employment numbers
Please check with your state to ensure that you have all of your t’s crossed and your i’s dotted.
9) Open Business Banking Accounts
This next step is so very important! Open separate business bank accounts. You cannot run a legitimate business with clean financials when you are mixing personal and business funds together. Having separate accounts is essential.
Banking is one of the most underrated decisions for a business, in my opinion. Below are some questions to ask when choosing a bank to deal with:
• Does the bank work well with your chosen financial software?
• Does the bank offer accountant access? This access is necessary for your accounting professional of choice to be able to pull your bank statements.
• Does the services of the bank match the needs of your business? These services may include items such as merchant services, company cards, multiple accounts, etc.
10) Apply for Necessary Licenses & Insurance
Like your federal and state ID numbers, your necessary licenses and insurance will completely depend on your state, structure and operations. Insurance is necessary regardless.
Some of the potentially needed licenses may include, but are not limited to:
• State business license
• Local business license
• Food service licenses
• Professional licenses
Be sure to check with your state and local regulations to see exactly which items your business will need.
Insurance is also needed for all types of businesses. The types of insurance are again, entirely based on the type of business you are starting, the location of your business and whether you will have employees. Some of these types of insurances could be Work Comp, Error and Omissions, Liability, Cyber, etc.
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