How to Start a Business: 5 Essential Steps
Want to know how to start a business? Anyone can learn how to start a small business, even if they are completely new to the process. Here are some steps you can follow to ensure you are successful.
1. Create a Business Plan
Once you have your initial business idea, create a business plan that outlines the purpose of your business, potential clients, etc. Ultimately, you want to make sure that your business fills a need in your intended market. Determine who your customer base is and if there is a demand for your product or service. In addition, you may want to include an exit strategy for your business. If you are forced to close, find out what the process for that would be.
2. Research Operating Costs
Starting a business costs money, so it’s important to do a thorough evaluation of your finances. Finding out the operating costs of your business is a good starting point. This will help you figure out how much startup capital you need. If you can’t afford to start your business with personal finances, consider applying for business loans or grants. You may also want to consider crowdfunding or third-party investors if you need a large amount of funding.
3. Determine Your Legal Structure
Before you get up and running, you need to determine the legal structure of your business. Your structure not only determines how you file taxes, but also affects your personal liability. Here are the filing options available to you:
- Sole proprietorship—this is for individuals who own the entirety of their business and are responsible for all the debts, liabilities, and obligations of the business.
- Partnership—this for businesses owned by two or more people who both accept personal liability.
- Limited liability company—this is the most common type of small business filing and gives some legal protections to the business owners.
- Corporation—this business type completely separates personal liability from the company, making the owner a separate legal entity.
If you have any trouble deciding between these structures, you can hire a business law attorney to help determine the best option for you.
4. Comply with State Requirements
Once you choose your structure, there may be a few additional requirements to fulfill. For example, some states may require a license to operate certain business types, such as retail food vending. Depending on your structure type, you may also need to file articles of incorporation or articles of organization with the state. You may also need to draft an operating agreement or corporate bylaws.
Not all businesses need to register with the government, depending on the state’s law. If you plan to hire employees, you will also need an employer identification number (EIN) from the IRS.
5. Build Your Brand
Before you start selling, you need to gather a following of people to support your business. Building a reputation, both in person and online, is essential to running a successful business. Try to set up a website and social media pages to advertise your products or services. If you need a logo or don’t know how to start a business online, find a local marketing company to help get you started with a quote.
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