Starting a business is not as hard as many people would tell you. What is really hard is starting the right business that will give you a profit. For instance, if it were a matter of starting a business, you would simply find a business idea, file some paperwork, and send out a press release – congratulations! you have started.
The challenge is starting a successful business; a business that will give you something back. And it is important to set up and run a business that won’t suck the life out of you and create a product or offer services that people love and pay you money for. These are the types of businesses we want to show you how to start.
Filing Requirements & Overall Ohio LLC Costs
Let’s take it that you already have a business idea in mind. Once you have chosen a business that you want to do, your next step will be:
Refine Your Idea
WHY do you want to launch your business idea? As Simon Sinek put it in his book “Start with Why“ Why should be the first question you need to explicitly answer before you proceed into answering other questions.
In essence, the answer to the “Why” should describe the mission and the core beliefs of your business organization. Put simply, describe why the business exists.
Once you have verified why you want to start your business, it is time to promote your business ideas. Don’t just think you have a good idea and run with it. You need to validate that there is a need for your business idea. In that connection, your next step should be conducting market research.
Conduct Market Research
Research your competitors
The presence of competitors is always a good sign. It means the market of your product already exists – so you are certain you have potential customers who are willing to spend money on your products.
Learn what current leaders in the line of your industry are doing right; what they provide to the customers and how they attract attention.
Research your target audience
Market research is aimed at validating that there is a need for your idea and how you can capitalize on the need to go to the top of the industry. The idea itself is not that important. Businesses run on customers and money, not ideas.
Spend time with different communities and verify how much they need your goods or services. Obviously, it will take some time and some work. But you should do this and discover where you can add value.
Validate your ideas
You can take a step further by considering the consumer’s needs that are not currently met by the competitors. If you can identify what is missing even before you set up your business, your work is going to be made even easier.
At this point, it is important to field test your idea, product, or service. Present your customer with the concept that you want to launch to gauge their interest.
Write a Business Plan
A business plan will help you in many ways. To begin with, it will help you figure out the amount of capital you will need to get started. Besides, it outlines what it will take to make your business profitable, what you need to do and when, as well as where you are headed. This is why it is commonly referred to as a roadmap for your business.
A business plan will also help you get outside funds, but this is not a guarantee. Depending on the type of business plan that you have composed, not many lenders take their time to go through the whole plan.
That said, as I always advise when writing a business plan, start with a lean one. The lean plan focuses on summarizing only the most important key elements of your plan. It includes forecasting your key business numbers, creating a pitch, outlining key milestones you want to achieve, and regular progress checks where you review and revise your plan.
As your business grows you can flesh out the sections as you see fit and improve them to a traditional business plan.
The traditional plan is complex and covers the following:
- An executive summary that includes a brief introduction and summary of your plan.
- Target market
- Product and services offered
- Marketing and sales plan
- Company overview
- Management team
- Financial plan
Fund Your Business
Starting a business requires money. For that reason, funding your business should be the next thing to think of after coming up with the business plan. As mentioned before, your business plan should help you assess your financial needs.
Once you know how much startup funding you’ll need, it’s time to figure out how you’ll get it. Depending on the scope of your business, you may get funding from the following investment and lending options:
- Venture capital
- Commercial banks loans
- Small business administration loans
- Account receivable specialist
- Friends and family
- Credit card
To stand a chance of getting funds from investors, you need to get started. Your business plan alone does not guarantee funds. According to Guy Kawasaki, most investors require a business plan as due diligence, and a detailed business plan is not a guarantee you will get funded. Most investors don’t bother reading the whole plan.
Determine Your Legal Business Structure
You have to be very careful when choosing a business structure. It would be prudent to consult business counselors, attorneys, or consultants. There may be restrictions based on your location that you may not be aware of.
There are 4 main types of businesses. We will highlight some key pros and cons of each entity to help you choose the right one for your business.
Sole proprietorship: You will automatically become a sole proprietor by operating a single-owner business that you haven’t registered. That said, a sole proprietorship is the easiest structure to form. Besides, it comes with the benefit of the owners having full control of the business.
However, this structure doesn’t have liability protection and the owner will be responsible for all debt and obligations.
Partnership: There 3 main types of partnership: general partnership, limited partnership, and limited liability partnership. Just like a sole proprietorship, a general partnership doesn’t require forming a business entity with the state. Partners simply form their business by signing a partnership agreement.
A limited partnership is a legal entity with at least one general partner who is responsible for business and one or more limited partners who do not actively manage the business. Limited liability partnerships operate the same way as a general partnership only that it has limited liability protection for one another’s action.
In all these three categories partners bear responsibility for debt and company obligations.
Limited liability company (LLC): This is the most common structure among small business owners because it is simple and easy to form but has a lot of benefits. LLC is a hybrid structure with legal protection of a corporation while allowing the tax benefits of a partnership or a sole proprietorship.
The company is treated as a pass-through entity for tax purposes. Though LLC members are subjected to self-employment tax, you can elect to be taxed as S-corp to avoid self-employment taxation.
Corporation: A corporation can make a profit, be taxed, and be held legally liable for a lawsuit. In essence, corporations offer the strongest liability protection. However, a standard corporation and B-corp are subjected to double taxation. To avoid double taxation, you may opt to be taxed as an S-corp.
S-corp is known for its tax advantage. It is treated as a pass-through entity but the shareholders are treated as employees and therefore don’t pay self-employment tax. At the same time, being a pass-through entity, the shareholder is not subject to corporate tax.
Once you have the right business structure, you can choose a business name then proceed to registration. Your business name should reflect the product or service that you are offering. Ensure the name is available for registration and then register your business.
Register Your Business
Registering your business is the first step towards making it legal. Your business structure and location determine how you will need to register your business. Once you determine those factors, registration becomes very simple.
For most small businesses, registering your business DBA/fictitious name/ assumed name is the same as registering your business. This means that when you are conducting your small business with your legal name, you don’t have to register your business. However, you have to know that registering a business comes with benefits so it is a great idea. For instance, a registered business has liability protection, legal and tax benefits.
Depending on your business, you will either register with the local agency, state agency, or federal agency.
Register With a Local Agency
You can register your business with the county or city government. A county or city registration gives you the right to run your business within that jurisdiction. Many entrepreneurs find it convenient to register their DBA with the county or city governments.
Register With the State Agency
Most states require registering with the secretary of state office, business agency, or business bureau. You can register online, in-person, or through email, depending on what your state allows. Registering your business with the state also gives you the right to operate your business within the state. Check with your state government office to determine what’s required in your area.
Register with the Federal Agency
If your small business requires trademark protection or tax-exempt status, you should consider registering with the federal government. If your aim is to trademark your business, you will have to file with the United States Patent and Trademark Office once you’ve registered your business.
Apply For License and/or Permit
To keep your business running and legally compliant with the authority, you will have to acquire a license or a permit. The type of license or permit you to need for your business will vary by industry, location, state, and other factors.
Some local governments don’t require licenses and permits e.g. Houston. Other local governments require a license for only certain businesses such as bars. Some careers such as private investigator require professional licensing as well as business licensing.
Other important requirements include opening a business bank account and acquiring an employer identification number (EIN). A small business checking account is very important as it can help you handle tax and day-to-day issues. EIN will be needed to open a bank account and pay taxes.
Starting a business is quite involved, but this article has made it simple. Just do your research well, have the right pick and follow our simple guide. Feel free to share with us your experience as you go through the process.
Frequently Asked Questions (FAQs)
Just develop your business idea and get creative with funding. You can get money by pitching your ideas to financial backers. You can also get funding through crowdsourcing platforms or set aside part of your income.
The easiest business to start is one that requires little to no financial investment. It should be a business that does not have a steep learning curve, no inventory management among others. For instance, local tour guide, dropshipping, painting, gardening, and landscaping.
There is a small business that requires very little capital to start. These include online sellers, virtual educators, drop shippers, freelance writers, editors, and social media marketers among others.
The most in-demand small business ideas to consider when starting a business include social media consulting, smart product development, healthy fast food, and healthcare consulting.
The 4 types of business include sole proprietorship, partnership, limited liability company, and corporation. We have given an explanation of each in this article.