Do you want to start a business? But have no idea how to get a business setup?
You’re not alone.
Most people who want to start a business don’t know where to begin.
From registering your business name to setting up your accounting system- there are numerous steps involved in becoming a business owner.
Not to mention, you need to have a developed product/service idea.
It can be overwhelming.
So much so, numerous business ideas go unfulfilled because prospective entrepreneurs are paralyzed by all of the steps it takes to open a business.
Don’t let this be you.
And even if you’ve ‘started’ a business in the past, are you sure you did everything necessary in the beginning to be successful?
In this article, you’ll learn the steps necessary to start a business.
1. Research, Research, and More Research
The very first to business setup is research.
Hopefully, you already have a business idea or concept. Now, it’s time to do your homework.
One fundamental area of your research is finding out if there is a market for your idea. Answering the question, “Do consumers need or want what I am offering?”
All businesses must solve a problem that someone is experiencing.
For example, before 1923, there were countless car accidents caused by the lack of traffic lights.
Garret Morgan, having witnessed one, decided this was a problem that needed to be solved. And did so, with the invention of the traffic light.
Or it can be as simple as selling small, airplane-friendly, containers, travelers can use to transport liquids on a plane.
The problem? People can’t bring oversized liquids on a plane.
The solution? Small containers to put those liquids in.
The more problem-specific you are, the better. It paints a clear picture of what you’re selling and is, therefore, easier to sell to consumers.
2. Develop a Business Plan
It not only good to have your ideas in your head but also on paper. The next step in a business setup is to develop your business plan.
A business plan documents your future objectives and strategies. It is essentially a guide that will navigate you from the beginning stages to the mature stages of business.
There are 8 major components to a business:
- Executive summary
- Company description
- Market analysis
- Organization and management
- Service or product line
- Marketing and sales
- Funding request (if applicable)
- Financial projections
You may need to conduct more research to develop each section of your business. If you’re unclear about financial projection, consider seeking the help of a CPA.
3. Choose an Entity Type
A big part of business setup is deciding on an entity type. The entity type you choose will impact your business liability and tax filing.
There are 5 main entity types to choose from:
- Sole Proprietorship
- Limited Liability Company
- S Corporation
- C Corporation
For a more in-depth break of these types, check our blog on Choosing an Entity Type for Your Business – Tax and Legal Considerations.
In general, picking an entity type for your business is a critical step in a business setup.
Once you choose the entity type that’s right for you, you’ll need to file the appropriate paperwork with the state.
Keep in mind, if as your business grows and things change, you can update your entity structure.
4. Register Business Name
Probably one of the most important aspects of a business setup is your business name. Make sure to consider all of the implications of the name you choose before setting one in stone.
Once you have a name, you need to make sure it is not being used or trademarked. If not, you’ll need to register it.
Typically, this is done through your state when you file to be a business entity.
Another great way to register your name is to buy the domain name (or website URL). This will be useful if you plan to have a website.
5. Apply for an EIN
An employer identification number or EIN, is a unique 9-digit number that is assigned by the Internal Revenue Service to your business. It is similar to a social security number for an individual.
Getting an EIN for your business is necessary if you don’t want filings and reportings under your social security number.
You’ll also want to apply for one if you plan to open a business bank account and establish business credit.
Applying for EIN is simple and free. You will need to file a Form SS-4 which is found on the IRS website.
6. Licenses and Permits
Depending on the industry, you may be required to file applicable business licenses or permits.
For example, hairstylists need a cosmetology license to do hair. Or liquor stores must have a liquor license to sell alcohol.
You’ll need to do your research into what licenses you’ll need to operate your business. It would be devastating to get shut down years afterward for a license that should have been granted as apart of business setup.
7. Accounting System
Every business needs an accounting system. Having an accounting system in place before you start making sales will ensure you effectively manage all of your transactions from the start.
Your accounting system will help you stay within budget, set prices, send and receive money, make decisions, and file taxes.
Setting up your accounting system is best done by an accountant for the most accuracy.
When setting up an accounting system, consider what software features you need. (Cloud-based, multiple users, budgeting, payroll, etc.)
Starting a business is not easy but the steps are manageable. Once you do all of the above business setup steps, you’ll have all of your most important bases covered.
Remember, Rome was not built in a day. It will take time to complete certain things like developing a business plan or setting up an accounting system. But with hard work and consistency, you’ll be on your way to being a successful business owner.
If you need help getting started, contact the accountants at LYFE Accounting! We’re here to help!