13 Steps on How to Start a Small Business

Brad Nakase, Attorney

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When he was five years old, Jamie opened his first lemonade stand on a residential street in San Diego. He loved the feeling of putting passion into a product and seeing how other people enjoyed it. He decided then and there that one day he wanted to create things for people to buy – to be a businessman. In college, Jamie got a degree in Business, and after he graduated, he was ready to start his first company. But Jamie was surprised to find that he didn’t know where to start. What kind of business did he want to run? And what kind of company did he want to set up? Also, there was the problem that he didn’t have any money to create a startup. So, one day, Jamie sat down with a coffee to brainstorm.

How to Start a Small Business

Starting a small business is not an easy endeavor, but the rewards of success make all the hard work worth it. Getting a small business up and running requires research, smart decision-making, and self-belief. That confidence in particular is important, especially when the going gets rough. Often, entrepreneurs start businesses without any money or equipment. Every decision is therefore critical and make-or-break. This means that early on, it is important to get the best advice and follow the proper steps to make sure no mistakes are made. Following the steps below can help an entrepreneur turn their dream business into a reality.

Step 1: Thinking of Business Idea

The type of business a person chooses to start will depend on their skills, knowledge, available time, and capital. Often, successful startups will be cheap to get off the ground and be able to operate from home. To think of an idea, an entrepreneur should consider his or her personal interests. What is their passion? Also, does that interest reflect a need in the market? A businessperson should consider how their particular skills or knowledge can satisfy a need in the marketplace and attract customers. For instance, a passion for classic cars can easily turn into a specialized repair business.

Step 2: Write A Business Plan

When it comes to starting a small business, planning is key. A watertight business plan can help structure a company and plan for the future. A well-written business plan should above all describe the purpose of the company. It should also go into what the company’s financial goals are and how they will be achieved. A business plan should cover the next three to five years. It can be shared with investors, lenders, or other people important to the business.

Step 3: Choosing a Business Structure

Every business owner must choose a legal structure for his or her business. Which one they pick will affect taxes, liability, and investment options, among other things. It is therefore important that a businessperson research the different types of legal entities, including sole proprietorships, general partnerships, limited liability companies (LLC), and corporations (S Corps and C Corps). When one is deciding between business structures, one should consider if he or she is comfortable accepting liability. One should also study the differences between how entities pay taxes to figure out what he or she is comfortable with. Also, some legal entities involve more intense administration and are stricter when it comes to management structure. A lot of these decisions come down to personal preference, and research is essential.

Step 4: Apply for a free IRS Tax ID also known as EIN, Employer Tax ID

Once a business owner has decided on the concept and structure of their company, he or she should apply for a federal tax ID. This identification is essential to file taxes, open bank accounts, and conduct other important business matters. The terms tax ID and EIN or Employer Tax ID are synonymous. Business owners may get a tax ID from the IRS online.

Step 5: Opening a Business Bank Account

An important step of opening a small business is setting up a business bank account. This account will be separate from the business owner’s personal account. Its purpose is to help organize the business’ finances so that sales, expenses, and taxes are easily tracked and taken care of. It is an important part of the setting up the company’s accounting structure.

Step 6: Securing Loan or Financing

If a business owner needs money to start his or her business, then he or she can apply for grants, loans, and other kinds of financing. There are government and private company grants for different types of companies, and local banks are often good choices for securing loans. The federal government through the Small Business Administration offers loans.

Step 7: Getting a Business Credit Card

By getting a business credit card, a small business owner can keep personal and company finances separate. This is good practice when it comes to liability and bookkeeping.

Step 8: Building a Website

In the modern age, having a presence online is critical to the success of a business. In addition to having a company website where patrons can visit, it is also essential to have a social media presence. This means a company should consider being active on Facebook, Twitter, Instagram, YouTube, TikTok, and other platforms. Creative social media marketing can make a business really take off.

Step 9: Deciding on a Payment System

If a business owner’s company accepts credit and debit cards, then the company will require a payment processor, a merchant account, and card readers. This is a necessary arrangement in order to get paid.

Step 10: Obtaining Financial Software

 In order to keep track of profits, performance, and business efficiency, a business owner should consider investing in financial software. Accounting software includes programs like QuickBooks, which is well-suited to small businesses. Apps like Square can help ring up customers, and programs like Gusto can help set up a company’s payroll.

Step 11: Hiring Employees

Depending on the type of business, it may be necessary to hire employees. If so, then a business owner should review employment laws related to hiring employees, including discrimination laws and payroll.

Step 12: Paying Taxes

As a new business owner, it is a good idea to review what taxes the business will owe, but also what tax breaks are available to small businesses.

Step 13: Purchasing Business Insurance

When an entrepreneur starts a new business, it is important that he or she protects both their company and personal assets. To do so, it is a good idea to purchase business insurance. There are different types of business insurance. These include the following:

  • General liability insurance
  • Commercial property insurance
  • Workers’ compensation insurance
  • Professional liability insurance

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An example of embezzlement is when a corporate director took money from a cash register and used the funds for his benefit.

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