How To Start A Business

Starting a business can feel like a maze. The U.S. Small Business Administration offers help and resources. ³ This blog will guide you through each step, making it less confusing.

Let’s get started! ¹

Key Takeaways

• Starting a business begins with developing an idea that solves everyday problems. Many successful startups focus on customer needs.
• Doing market research helps you understand your future customers. It uses surveys and data from public records.
• You need a good business plan. This plan outlines how your company will make money and grow over the next few years.
• Choosing the right business structure is important. Options include Sole Proprietorship, Partnership, LLC, and Corporation.
• Registering your business and getting the correct licenses is necessary before opening. This makes your business legal and official.

Develop Your Business Idea

Moving from the “why” to “how” of starting a business sets the stage for your next big step: shaping your business idea. A solid foundation here is critical since almost 80% of new businesses keep their doors open after one year.

Begin by identifying problems in daily life that need solutions. This approach can spark ideas that meet real demands.

Engage with people close to you like family and friends about what inconveniences them. Their feedback could lead you to discover services or products that don’t exist yet but should.

Consider, 14% of startups fail because they overlook customer needs. ¹ Focus on creating solutions that simplify life for people, and you’ll have made significant progress in the direction of a successful venture.

Conduct Market Research

Conducting market research means gathering info about what customers need. First, you gather new data through talks and questionnaires. This is called primary research. It helps find out direct answers from people.

Then there’s secondary research. Here, you look at already gathered data from industry reports and public records. Both types help figure out who will buy your product and why. ²

Market research isn’t a one-time thing; it’s ongoing because what customers want keeps changing. You make guesses, pick a type of study, and decide which group of people to ask. Finding the right audience means asking folks who might actually use your service or product.

After all this work, getting a business plan ready is the next big step.

Create a Business Plan

Formulating a business strategy is akin to sketching a guide for your voyage. It functions as a beacon, directing and maintaining your course. This strategy incorporates exhaustive details about your company’s operations, profit-generating methodologies, and future aspirations spanning three to five years.

It’s more than just a dossier; it embodies your business’s master plan. ⁴

Your plan should incorporate an introductory page, tabulated contents, and divisions for fiscal forecasts. These forecasts bear significant relevance if you’re on the quest for funds because they demonstrate to lenders your astute business insights.

Moreover, considering that enterprises undergo frequent transformations, particularly in the case of startups, keep in mind that your business strategy holds a flexible nature. Adjustments, modifications, and enhancements become imminent as your familiarity with your industry and market competitors grows via market investigations.

So, get ready—now is the moment to document your innovative concepts! ³

Choose a Business Structure

Picking the right setup for your business feels like choosing a seat on a roller coaster. Do you want the thrill of being up front, running a Sole Proprietorship, or would you prefer to share the ride with partners? Each choice has its ups and downs, and finding the one that fits just right is key to enjoying the journey ahead.

Sole Proprietorship

A sole proprietorship is the easiest way to start a business. You and your business are one and the same in the eyes of the law. This means you get all the profits, but it also means you’re on the hook for any debts or problems.

In Maryland, don’t forget, you need to file an Annual Report and Personal Property Tax Return every year. ⁵

This kind of business doesn’t separate your personal money from your company’s money. So if things go south, your own savings could be at risk. But setting it up is simple: no fancy paperwork required except for maybe a business license depending on what you do.

And when tax time rolls around, you just add your business income to your personal taxes – easy peas.

Partnership

Choosing a partnership means you’re not going solo in the business world. There are two kinds: Limited Partnerships (LP) and Limited Liability Partnerships (LLP). ⁶ In an LP, there’s at least one person who calls the shots but also has more to lose if things don’t go well.

Then, there are those who put money in without running the day-to-day; they have less on the line. LLPs are a bit different since everyone gets some protection for their personal stuff while still owning part of the company.

Alone we can do so little; together we can do so much. – Helen Keller

This setup lets profits flow directly to each partner’s pocket, dodging extra taxes that come with other business styles. ⁷ Also, picking an LLP can be like installing a safety net for your bank account when unexpected troubles hit your business doors.

Limited Liability Company (LLC)

A Limited Liability Company, or LLC, is a way to start a business that keeps your personal money safe if your business owes money. This means, if things go wrong, only the money you put into the business is at risk.

States have rules for setting up an LLC. You can choose how to manage it and how you pay taxes on the money it makes. The IRS has info about these choices. ⁸

To set up an LLC, you need a name that’s not already taken and some paperwork filed with your state. You might also have to get a special tax number from the IRS called an EIN. It’s like a social security number for your business so you can hire people and open a bank account in the name of your company.

After setting up an LLC, next steps include registering your business officially.

Corporation

Switching focus from LLCs, let’s discuss corporations, a route some elect for their business journey. Corporations provide limited liability to shareholders, implying that if things don’t go as planned, your personal assets remain secure.

They exist as separate entities, which proves beneficial in safeguarding your personal possessions. ⁹

However, there’s a catch. C corporations encounter double taxation on income—once when the company earns it and again on dividends paid to shareholders. S corporations avoid this issue by allowing profits (and losses) to transit directly to owners’ individual tax returns.

It seems advantageous but keep in mind, establishing a corporation requires passing through more legal constraints than you’d encounter with other structures. You’ll manage a significant amount of documentation and stricter regulations that can feel like navigating a challenge course conceived by bureaucrats.

Register Your Business

Getting your business off the ground means making it official. Think of registering your business like announcing to the world, “Hey, I’m here and ready to roll!” It’s about putting a name tag on your dream so everyone knows its name.

So don’t just sit there; dive into the adventure of turning your idea into something real. Read more and see how you can turn that big dream into an even bigger reality.

Obtain Necessary Licenses and Permits

Starting a business is thrilling. But we shouldn’t dismiss the legal aspects, such as procuring the appropriate licenses and permits.

1. Identify the licenses required. It’s determined by your area and your business’s nature. For instance, opening a restaurant will necessitate health permits. ¹⁰
2. Consult local government websites or bureaus for information on procuring these licenses.
3. Procure a federal license if your business partakes in activities overseen by government agencies such as the FDA (for food businesses) or the FAA (if you’re contemplating using drones for commercial use).
4. Be aware, some sectors necessitate special permits as well. If you’re transmitting information over the radio, the FCC is your point of contact.
5. Health permits are paramount for those handling food — this ensures everything abides by safety regulations. ¹¹
6. Refresh your licenses and permits every one to three years, subjected to their conditions.

Following this, we’ll discuss obtaining an Employer Identification Number (EIN).

Get an Employer Identification Number (EIN)

Getting an Employer Identification Number (EIN) is like getting a social security number for your business. The IRS gives it out for free. You need this to hire employees, open a business bank account, and pay taxes right.

You can get one quickly online from the IRS website. This way, you get your EIN right away. ¹²

You can only get one EIN per day if you’re the responsible person handling this task. This rule started on May 21, 2012. Make sure this person is not a company but someone real, like yourself or a trusted partner in the business—not counting government entities, of course.

Set Up Your Finances

Setting up your finances is like laying the foundation of a house; it needs to be strong to support everything else. It involves opening a bank account just for your company, learning about what taxes you’ll need to pay, and making sure you understand how money will come in and go out.

Don’t skip this step—read on to make sure your financial ducks are in a row!

Open a Business Bank Account

Opening a business bank account is like giving your business its own wallet. You need to keep your personal money and your business money separate. This helps you look more professional and makes managing finances easier.

For this, you’ll bring the address of your business, the names of the owners, and something that shows your business is real. ¹³

There are three main types of accounts: checking, merchant services for accepting credit card payments, and savings or CDs for saving money. Having an account helps build a credit profile for your business.

This is important when you want to grow or need loans. ¹³

A strong foundation in finances sets the stage for business growth.

Understanding taxes comes next after sorting out banking.

Understand Your Tax Obligations

Taxes can seem like a maze, but let’s keep it simple. Picking your business structure decides what tax forms you use. ¹⁴ You can go with a Calendar Year or a Fiscal Year. ¹⁴ Getting an Employer Identification Number (EIN) is key for this step.

Each new hire fills out Form I-9 and Form W-4. This checks if they are allowed to work and tells how much tax to take from their pay. So, managing taxes isn’t just about the company; it involves every person who works for you too.

Secure Funding for Your Business

Getting money for your business is like watering a plant; it’s essential to grow. Whether you’re digging into your savings, getting a loan, or finding folks online who believe in what you’re doing, there are many ways to get the funds.

It’s all about finding the right fit for your dream venture. Ready to learn more? Let’s dive in and find the best route to fuel your business journey!

Bootstrapping

Bootstrapping is like starting a garden with seeds you already have. You use your own money, maybe from savings or help from friends and family. Some people even keep their day job to make sure they have enough cash flowing in. ¹⁵ It’s all about using what you’ve got to get your business off the ground without taking out loans or bringing in investors right away.

Bootstrapping a business means relying on your own resources, teaching you to be resourceful and careful with every dollar. ¹⁵

This way has its tough spots. You might not have as much money as you need, which can slow things down. Sometimes, costs are more than expected. Yet, it lets you keep control of your business and grow it at your pace.

Plus, the joy of building something from scratch with your own hands? Priceless.

Small Business Loans

After digging into your pockets to start your business, you might need more cash to keep it growing. This is where small business loans come in handy. The Small Business Administration (SBA) offers help through programs like 7(a) loans, 504 loans, and microloans.  They make getting money less scary by backing the loan. This means if things go south, they’ve got part of the bill.

Before you dive in, get ready with a solid business plan and understand your numbers—like costs and how much money you think you can make in five years. Then, use SBA’s Lender Match tool.

It’s like speed dating but for finding the perfect bank that believes in your dream as much as you do. No matter what stage your company is at, these steps can guide you toward the financial push needed for growth or starting up strong.

Crowdfunding

Shifting gears from small business loans, we find ourselves looking at crowdfunding. This route collects money from a crowd, each pitching in a bit. Unlike loans, you don’t have to pay back these funds if things go south.  Imagine keeping full control of your venture while giving backers cool perks or gifts as thanks. Every crowdfunding platform has its own rules, so pick wisely.

Crowdfunding can be a sidekick to other funds like venture capital or more loans. It’s perfect for those who want to spread their wings without heavy strings attached. Think of it as gathering an army of supporters all rooting for your success, each contributing to your war chest without claiming a piece of the land.

Build Your Team

Finding the right people for your startup is crucial. You want folks who can move fast and think on their feet, since big company veterans might find the small business pace tough.  Mix it up with different talents that complement each other. This way, everyone brings something special to the table.

Celebrate when your team does well; it boosts spirits and brings everyone closer. Try doing “hack weeks” every few months too. These are times when your employees can work on fresh ideas together, sparking more innovation and teamwork in your growing business.

Brand and Market Your Business

Once your business is up and running, it’s showtime for your brand. Think of branding as dressing up your business; it needs to look sharp, appealing, and make a strong first impression.

Marketing spreads the word like wildfire. It uses social media, emails, and websites to shout from the rooftops about how great your product or service is.

Create a Logo and Brand Identity

Creating a logo and brand identity might feel like climbing a steep hill, but it doesn’t need to be. With Looka’s AI-powered platform, you can create a unique logo faster than brewing your morning coffee.  No design skills needed—the technology provides over 300 designs you can choose from. Consider your brand as your business’s unique fingerprint; it’s what distinguishes you in the competitive market.

With Looka, obtaining those attractive SVG, PNG, EPS, and PDF files is a cinch. 

Your brand is more than just a logo; it’s the core and life of your business.

So, after selecting that ideal design template on Looka, ensure that consistency across all customer interaction points establishes trust. Whether it’s your website or social media platforms, maintain uniform colors and fonts.

Such coherence makes your brand instantly identifiable—a requirement for online visibility!

Develop an Online Presence

To grow your business, making a mark online is key. With 67% of shoppers looking for services that are fully available online, you must have a website or social media page.  This makes it easy for customers to find you anytime, anywhere.

Plus, over half prefer buying things online, so adding e-commerce can really boost sales. 

Interacting with customers through reviews is also important because almost everyone reads them before choosing local businesses. And did you know? Ads that follow people around the internet work way better than old-school ads.

They can be more than 1,000% more effective! So, think about using them to remind folks about your awesome products or services.

Launch Your Business

Now is the time to launch your business. Get all your tools ready. Your website should be up, looking good, and easy to use. Make sure people can find you online. Put your brand out there on social media too. 

Your big day has come after much planning and hard work. Have a special event or offer a sale to get customers excited. Tell everyone you know about it. Use emails, posts on Facebook, and even flyers around town.

Opening a business is a big step but sharing it with others makes it real and fun.

Conclusion

Starting a business feels like planting a tree. You need good soil (a solid idea), plenty of sunlight (hard work and creativity), and water (funding and support). Each step, from planning to launching, adds branches to your growing tree.

Don’t forget about the roots – licensing, taxes, and bank stuff keep your tree firm in the ground. With care, time, and patience, your small sapling can grow into a strong oak. So go on, plant that seed! Your business adventure awaits.

References

1. ^ https://mailchimp.com/resources/how-to-create-business-idea/
2. ^ https://online.hbs.edu/blog/post/how-to-do-market-research-for-a-startup (2022-03-17)
3. ^ https://www.nerdwallet.com/article/small-business/business-plan
4. ^ https://www.shopify.com/blog/business-plan
5. ^ https://businessexpress.maryland.gov/plan/choose-business-structure
6. ^ https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
7. ^ https://www.thehartford.com/business-insurance/strategy/business-structure
8. ^ https://www.irs.gov/businesses/small-businesses-self-employed/business-structures
9. ^ https://www.agmanager.info/sites/default/files/Business3.pdf
10. ^ https://www.legalzoom.com/articles/starting-a-business-a-license-and-permit-checklist
11. ^ https://www.sba.gov/business-guide/launch-your-business/apply-licenses-permits (2024-05-20)
12. ^ https://www.irs.gov/businesses/small-businesses-self-employed/how-to-apply-for-an-ein
13. ^ https://business.bankofamerica.com/resources/how-to-open-a-business-bank-account.html
14. ^ https://www.irs.gov/newsroom/understanding-the-tax-responsibilities-that-come-with-starting-a-business
15. ^ https://www.lendingtree.com/business/bootstrapping-your-business-how-to-start-a-business-with-no-money/