Starting a business is exciting—but also demanding. This article addresses some of the most common startup steps to ensure your company is ready for success.
1. Prepare a business plan
An important first step is preparing a business plan to define your business, products, and services, and outline your goals, operating procedures, and competition. If your company needs funding from a traditional loan or venture capitalists, a business plan will be required. Make sure your plan includes a marketing approach, so people are aware of what you're selling and how to find you.
2. Create a marketing plan and brand identity for your products and services
Increase the likelihood of success by creating a plan for promoting your products and services to your target market.
Create a business logo, cards, and stationery. These items establish your company’s identity and help potential customers find and remember you.
You will also need a website and social media accounts to establish your brand. This may be the first opportunity you get to make a good impression with customers and prospects.
Lastly don't forget to create any necessary contracts, service agreements, and invoices so you can easily bill customers, track payments, and keep records.
3. Incorporate or form an LLC
Of course, incorporating your business or forming an LLC with the state is important because it protects your personal assets from business debts and liabilities. Other benefits of forming a corporation or LLC include tax advantages and greater credibility with customers, vendors, and business partners.
4. Select an accountant and attorney
Many small business owners seek advice from accountants and attorneys. As you search for an accountant and attorney, get referrals from friends or family, and look for professionals who have worked with other small business owners or companies in your specific industry.
You will probably want to use software or online tools to keep a close eye on expenses, invoices, income, inventory, and so on.
5. Get necessary tax identification numbers, licenses, and permits
A federal tax identification number (also called an employer identification number or EIN) acts like a social security number and is required for corporations and LLCs that will have employees. It’s used by the IRS to identify your business for all taxation matters Contact your state's taxation department to learn if a state tax identification number is required in your state.
Also keep in mind that most businesses require licenses and/or permits to operate. Licenses may be required by your city, municipality, county, and/or state. Contact your Secretary of State and local government to ensure you meet any requirements.
6. Insure your business and investigate other requirements
Some industries have specific insurance requirements. Discuss your needs with your insurance agent to get the right type and amount of insurance. Remember to look into any other government tax and insurance requirements that might apply to your business, particularly if you have employees. For example:
- Unemployment insurance
- Workers' compensation
- OSHA requirements
- Federal tax
- State and local tax
- Self-employment tax
- Payroll tax requirements (such as FICA, federal unemployment tax, and state unemployment tax)
- Sales and use tax
7. Open a business bank account
It is crucial to separate business finances from personal ones. Most banks require company details, such as formation date, business type, and owner names and addresses. If your business is not incorporated, most banks will require a DBA (doing business as or fictitious business name). Contact your bank about requirements prior to opening an account.
8. Arrange your business accounting and apply for loans
You may want to use an accountant (see step 4), or handle finances yourself with a small business accounting solution. Either way, properly account for all business disbursements, payments received, invoices, accounts receivable/accounts payable, etc. And if you don’t have enough capital to start a business, this is also the time to seek funding from banks, investors, or through Small Business Administration (SBA) loan programs.
9. Establish a business line of credit
This will help reduce the number of times your company prepays for purchased products and services. It also helps establish a strong credit history, which is helpful for vendor and supplier relationships. Getting a Dun & Bradstreet (D&B) DUNS (or D-U-N-S) number for your business is advisable, as it is often used to check business creditworthiness.
10. Ready your workspace
For home-based businesses, ensure you are meeting city zoning requirements for your area. For non-home-based businesses, you'll likely need to lease office space. Don't forget to purchase or lease furniture and office equipment to get your business up and running.