Turning a small business idea into reality involves research, planning, and knowing what decisions need to be made. This quick guide covers the key legal and other requirements for starting a new business.
1. Perform a market analysis
One of the first steps to starting your own business is to gather information about your target customer base and your competition. Market research will provide insight into your strengths and weaknesses, as well as opportunities and barriers to business success.
2. Prepare a business plan
Another important step when starting a new business is to prepare a business plan that will provide a foundation for your business. The purpose of a business plan is to define your business, products and services, as well as outline how your company will operate and potentially expand. A business plan is generally required in order to obtain funding from a traditional loan or venture capitalists. Make sure your plan includes a marketing section, which will provide a basis for promoting your products and services to your target market.
For more information:
- Writing your business plan
- Creating action plans: Operations and management
- Marketing plan component of your business plan
3. Establish a brand identity for your products and services
Create a business logo, cards, and letterhead template. 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 and reach your audience. 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.
- A guide to branding your small business
- Create a brand style guide to ensure consistent brand identity
4. Choose your business name
When deciding on what to name your business, it’s important to decide upon a name that’s easy to remember, descriptive of the business, and makes sense to your brand.
If you choose to operate your business under a name other than your personal name (if you are a sole proprietor) or legal entity name (if you are an LLC or corporation), you will need to register that name with local and/or state governments in a process known as filing a “doing business as” (DBA) name.
- Expert Insights: How to Name Your Business
- What is an assumed business name? (DBA)
- Can I use a business name that exists in another state?
5. Incorporate or form an LLC
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.
6. 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.
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.
Many small business owners will 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.
7. Investigate insurance and 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
8. Open a business bank account and obtain a business credit card
It is crucial to separate business finances from personal ones. Having a business credit card helps to keep personal and business assets separate, which is important to maintaining the limited liability protection provided by an LLC or corporation business structure.
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.
9. Arrange your business accounting and look for financing
You may want to use an accountant 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. You will probably want to use software or online tools to keep a close eye on expenses, invoices, income, inventory, and administrative matters.
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.
Ready to start your small business?