Interested in launching a new business but aren’t sure where to start? This step-by-step guide is designed to help you with everything from conceptualizing and validating your idea(s) to determining the logistics of launching your product or service.
1. Find a Business Idea
The first step in starting a business is figuring out what you want it to be. Finding small business ideas is a task you can approach systematically by relying on time-tested approaches that have worked for other entrepreneurs. Whether you plan to leverage a talent, follow a passion, fill a niche, or something else altogether, it’s imperative you have a clear understanding of your business idea and can effectively communicate and share it with others.
2. Draft Your Business Plan
Drafting a business plan helps formalize your idea and can streamline the business-creation process as it forces you to methodically work through your thoughts and establish a strong foundation. A general business plan should include:
3. Secure Financing
Your business plan will help determine how much money you’ll need to get up and running. Some of the most common funding options include: personal investments, business loans, business grants, and crowdfunding.
4. Select a Business Structure
Choosing the right structure is about balancing the legal and financial protection you need with the flexibility offered by different options. It’s an important decision, and it’s one you should consider carefully before you launch your business. While business structures vary based on your location, the most common business entity selection are: sole proprietorship, limited liability company (LLC) and corporation.
5. Get Federal and State Tax ID Numbers
Federal tax ID (EIN)
A federal tax ID, also called an employer identification number, or EIN, is a nine-digit number the IRS assigns to businesses and organizations for tax purposes. Think of it as your business’s Social Security number.
You’ll need an EIN if
Having an EIN will
State tax ID
A state tax ID is separate from your EIN. An EIN is assigned by the federal IRS, while a state tax ID is assigned by your state.
A state tax ID has a similar purpose to an EIN in that it helps your business comply with state laws. However, each state has different requirements, regulations, and even tax laws. We encourage you to research your individual state’s laws to see whether your business will need a state tax ID. As laws vary from state to state, you may wish to start at your state’s taxation department, department of treasury, or secretary of state.
6. Obtain a Business License and Permits
Once you understand how to start a business, you must identify which local, state, and federal licenses you may need to operate legally. It’s worth consulting with a small business lawyer to get advice before you launch your business.
7. Establish a Business Bank Account
To make managing your finances far easier, take the time to open a business bank account and obtain a business credit card. Separating personal and professional finances simplifies your tax prep and filing and can help you automate some of the financial steps to starting a business.
8. Purchase Business Insurance
Business insurance helps protect your small business and personal assets from anything that could go wrong. Each state has different laws and requirements when it comes to insurance, but even if your state doesn’t require it, it’s always a good idea to give yourself and your business extra protection. The most common types of business insurance include: liability, commercial property, commercial auto, worker’s compensation, professional liability, product liability, business interruption, cyber liability, and umbrella.
To help you decide on what insurance you may need, you must first understand the risks of the industry you’re in. As this process can be overwhelming, you may wish to work with a commercial insurance agent who can help you find policies that match the needs of your business and your price point.
9. Brand Your Business
While building a brand is no easy task, it is critical to your visibility and success! A brand is more than just your logo and name, it’s how people perceive you whenever they interact with your small business.
Common elements of branding include:
10. Launch Your Website or Online Store
Starting an online store or website for your business is both rewarding and profitable when done right. Having an online presence will gain credibility with potential customers and make it easy for them to access your business, versus going to a physical store.