Starting a Business 101

Starting a Business 101

Monzerrath Ortiz
 | 

Starting a business from scratch can seem like a long and daunting process- especially during a pandemic. 

According to the Bureau of Labor Statistics, only 4 out of 100 businesses reach the 10-year mark, and 82% of companies fail due to financial problems. 

While such statistics seem discouraging, they are also a reminder that a successful business requires a great deal of planning and strategizing. 

We’re here to break down the steps to starting a business in order to ensure you can turn your vision into reality. 

Step 1: Market Research 

Conducting market research early in the business-planning process will help you assess the potential of your idea.

This entails researching competitors that offer similar products or services, and verifying that you’re bringing something innovative and promising to the table. 

A few questions to consider during this step: 

  • Is there a demand for your service/product? 
  • Is your business profitable? 
  • Who is your target customer/client? 
  • How competitive is the market you plan to enter? 
  • What sets your business apart from competitors? 
  • Do you qualify for small business grants and/or loans? 
  • What is the estimated cost of starting your business? 

Step 2: Choose a business structure 

The most common type of business is a sole proprietorship, which is a business that is owned and operated by one person. 

In the United States, over 23 million people own a sole proprietorship. This type of business makes up 73% of businesses in the U.S. 

Other business structures include partnerships, corporations, and limited liability companies (LLC’s). 

This is an important part of the process because the legal procedures behind establishing each type of business varies. 

In some cases, if your business is under your legal name, you are not required to register anywhere. 

According to the U.S. Small Business Administration, “most businesses don’t need to register with the federal government to become a legal entity, other than simply filing to get a federal tax ID.” 

However, it is still worth considering registration because it can provide personal liability protection and other legal and tax related benefits.

Additionally, registration can also provide small businesses with trademark protection or a tax exempt status. 

Step 3: Create a Business Plan 

Once you have completed your market research and selected a structure, it is time to create a business plan. 

A business plan is a formal document that outlines your marketing, financial, and operational objectives/strategies. 

Your business plan should serve as a roadmap for your plan of action. Ideally, it should consist of the following sections: 

  • Executive summary 
  •  Target market information 
  • Products and services 
  • Marketing and sales plan 
  • Milestone goals 
  • Company overview 
  • Management team 
  • Financial plan 
  • Appendix 

It is important to note that this document is not only beneficial for the coordination and structuring of a business, it will also most likely be required by bank lenders, venture capitalists, and angel investors. 

If you plan on applying for funding, having a comprehensive business plan is key to attracting investors and lenders. 

Step 4: Seek legal consulting 

It’s no secret that establishing a business involves a wide range of legal requirements and responsibilities. This includes: 

  • Choosing a business entity structure 
  • Registering your business 
  • Applying for a Federal Tax ID number
  • Obtaining business permits and licenses 
  • Obtaining your employer identification number (EIN) 
  • Formulating a founders agreement 
  • Insuring your business 

Consulting with a business attorney can simplify this process and ensure you are complying with the law. 

Step 5: Financial Planning 

This is arguably the most important part of starting and sustaining a business. After all, financial security is essential to the survival of any business, no matter type or size. 

First, it would be highly beneficial to reach out to a financial consultant and/or accountant to discuss creating a detailed financial plan. 

Said plan would ideally involve: 

  • Researching and selecting the business grants you will apply for ? Considering investment and lending options (e.g. venture capital, angel investments, SBA loans, and accounts receivable specialists) 
  • Opening a business bank account 
  • Review tax requirements 
  • Acquiring federal and state tax identifications 

Step 6: Register the business name 

As previously mentioned, the steps to register your business will depend on the structure of the business and its specific location. 

If you intend to establish a partnership, corporation, or LLC, you will likely need to register your business with the state in which you plan to operate. 

In most cases, this will involve registering with your state’s Secretary of State’s office, a Business Bureau, or Business Agency. 

To learn more about the rules surrounding name registration in your state, check out this directory for Secretary of State offices in the U.S.
 

Step 7: Market/promote 

One of the best ways to promote your business today is by creating an online presence. Social media can be a powerful tool for marketing depending on how you navigate it. 

While there is no “perfect” way for businesses to approach social media, in general, you should strive to promote content that will showcase the best parts of your product or service. 

Whether it is through creative infographics or a unique company aesthetic, there are many different ways to do this. 

Ultimately, whichever route you take, it is important to ask yourself: what is the best way to present your product or service while appealing to your target audience or customer? 

 

LawChamps is ready to connect you with an experienced attorney to help meet your business goals every step of the way. Click here to learn more about how LawChamps can help you kickstart your business.
 
This article is intended to convey generally useful information only and does not constitute legal advice. Any opinions expressed are solely those of the author, not LawChamps.
 
Monzerrath Ortiz

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