Starting a business in the U.S takes some strategic planning and a series of legal steps. The below guide provides the key steps necessary for entrepreneurs wanting to turn their ideas into actual businesses.
Decide on a Business Idea
The first step is to figure out what the business function will be and in which industry. A market analysis is a tried and tested method of establishing whether a business idea is viable.
A successful business will have to provide a product or service that is in demand or solves a key problem for its target market. It is also important to evaluate the current competition to ensure that the market is not saturated.
Lastly, the business idea must be something that you are passionate about and would want to do for a long time.
Decide on a Business Name
A business name is an important part of forming a new business. The perfect name will capture the spirit of the business and reflect the brand.
The state the business will operate in may require legal registration of a name depending on the business structure chosen.
There are plenty of free online name generators to search for an available business name.
Draft a Business Plan
Successful business owners will agree that a business plan is key to starting a business. It forms the foundation of the business through methodically planning out key business objectives, finances and operations.
A business plan is also the first document an investor or financier will ask for before considering getting involved.
Very few entrepreneurs have enough funds available to start a business and many have to look for funding elsewhere.
There are a few options to look at when trying to secure funding:
- Bank Loans – Provided that the applicant has a good credit record, business loans can be obtained from the bank.
- Investors – This can be anyone from family, friends or other persons interested in investing in the business.
- Crowdfunding – A non-traditional way of securing funding is to crowdsource from various groups of people online.
Decide on a Business Structure
Choosing the right business structure will depend on the type of business and location. Most states offer the following business structures to choose from:
- Sole-proprietorship – The owner is the only person involved in the business.
- Partnership – The business is owned by more than one person.
- Limited Liability Company (LLC) – Small business entity that provides liability protection for the owner’s personal assets.
- C-corporation – Usually larger corporations. The business is owned by shareholders who each have a stake in the business.
Many small businesses choose to form their business as an LLC because it provides protection for their personal assets which a sole-proprietorship doesn’t. With the right help, this business structure is easy to obtain and there are a variety of LLC Services available that can streamline the process.
Register for Federal and State Tax
Some states like California require a business to obtain an employer identification number (EIN) from the IRS for federal tax purposes. An EIN is also required for a business that employs staff.
State taxes will depend on the regulations and requirements of the state the business will operate in. The official U.S Government website provides a guide on all the different state tax requirements.
Apply for Licensing and Permits
Depending on the industry and the location, some business will be required to obtain a business license to operate. The local state website or municipal office can provide accurate information on which licenses and permits are required.
Obtain Business Insurance
Any business needs to be protected against unforeseen events that could cause major financial losses. This could be natural disasters, vehicle accidents or damage to property and products.
Most small businesses acquire general liability insurance which covers an array of events such as:
- Bodily harm or injury
- Property damage
- Advertising injury
Open a Business Bank Account
It is advisable to open a business bank account even for small businesses. This will ensure that business finances are kept separate from personal finances and will ensure that taxes can be done easily.