Starting a Small Business

Steps to Starting a Small Business

Plan your business

So you've decided to start your own business, Congratulations! Now it's time to get started. You need to have some sort of business plan. A good business plan is the first step to starting a successful business. A well-written business plan should include specific goals and how those goals will be achieved. It is your vision on paper. It makes your path and objectives clear. In order to receive any type of financing, you will need to present a clear and well thought out business plan to banks and potential investors. If you need help writing a business plan, there are several business organizations that provide support and mentoring.

Seek Assistance

One of the biggest mistakes that small business owners make is not seeking out mentors with previous business experience. Take advantage of free online tools and resources including free online business classes. Seek out an online community of other business owners, entrepreneurs and experts. An online community can provide additional support and information.

Choose a Location for Your Business

There are many things to consider when choosing a location for your business. What are the leasing and zoning restrictions in your area? If you are starting a home-based business, what are the zoning laws in your area? Is there ample parking? Is your business easily accessible to customers? These are just a few of the considerations you need to think about when choosing your location. You might also want to see what types of financial incentives and tax credits there are available in your local area. Choosing the right location can make or break a small business. It is wise to research the local area statistics.

Find Financing for Your Small Business

This is a step where patience is a virtue. A lot of small business owners and entrepreneurs get discouraged during this stage. Perseverance is needed because you may get the door shut in your face a few times before you are approved for financing or find willing investors. There are traditional sources of financing such as banks and credit unions. You can find loan application forms at your local lending institutions. Many lending institutions have an online application form. Most lenders have government-backed loan programs which can offer lower interest rates and flexible repayment schedules for the borrower. In addition to traditional finance options, there are many other sources for small business financing such as local and state government programs and non-profit organizations and local agencies.

Decide the Legal Structure of Your Small Business

When starting a small business, you need to decide the legal structure of your business. This is also known as incorporating your business. This will determine the type of regulatory paperwork you will need to fill out as well as taxes you will have to pay. Here are some of the types of business structures you will need to choose from:

Sole Proprietorship - one single owner owns and operates a business and is personally responsible for debts and obligations.

Partnership - two or more people who share ownership of a business.

Corporation - a legal entity owned by shareholders

S Corporation - a unique form of a corporation that is created through tax election.

Limited Liability Company (LLC) - a newer legal structure that combines characteristics of a corporation and a partnership.

Non-Profit Organization - an organization that is involved in private or public interests and whose purpose is not to make a profit. Non-profit organizations may be federally exempt from paying taxes.

Cooperative - a business organization owned by and operated by those utilizing it's services.

Register Your Business Name

When starting a small business, you will need to register your business name or â€œdoing business asâ€ with your state government. This will be considered your legal name and will be the name you use on all government forms and applications, taxes, licenses and permits. If you choose to operate your business under a different name than your personal name or business name then you will need to register a â€œfictitious nameâ€ with your government agency.

Apply for a Tax Identification Number

A tax identification number is required for all businesses for the purpose of identification. All businesses are required to pay federal, state and sometimes local taxes. You will need to apply for a tax id number with federal, state and local revenue agencies.

A federal tax identification number is known as the EIN or Employment Identification Number. You will need to apply with U.S. Internal Revenue Service. You can learn more and fill out an online application on the I.R.S. website.

A state tax number is required for businesses operating within a state. For more information about state specific requirements in your state visit the State Tax Guide.

Acquire Your Business Licenses and Permits

Your business will require one or more permits and/or licenses in order to operate. The complexity can vary according to the type of business and location site. For more detailed information on business license and permit requirements in your state.

Hiring and Managing Employees

There are many useful and supportive sites and resources to help you with this step in your business. It is important to get organized from the very beginning. Proper record keeping is essential. For many first time business owners and entrepreneurs, hiring and management practices are completely unknown. This is a work in progress for many allowing for a wide learning curve. If you educate yourself beforehand, the process will be smoother in the long run. For more information on hiring and managing employees.