Do your research
Unfortunately, many businesses fail in the United States each year. According to Small Business Administration, approximately 20 percent fail in their first year. About half of all small businesses survive to their fifth anniversary. If you do your research and are armed with the most information possible, your small business has a better chance of success.
Start by researching the market that interests you. Does your business have a real need? Are you able to access the capital you need to succeed? Do the right people surround you to help you achieve your goals? Small Business Administration provides data on many different topics, including free counseling.
Create a business plan.
A business plan summarizes the goals of a company. It will contain detailed financial and operational procedures to help you reach your business objectives. It is your road map to success.
You should incorporate the information you gathered during your initial research into your business plan.
- Analyzing the market can help determine whether your business will serve a niche market or meet an unmet market need.
- A Competitive Analysis includes the strengths and weaknesses of your competitors and helps you to develop a strategy that will help you carve out your niche in your market.
- Your Management Plan will outline your business structure, management, and staffing needs. You should include all job descriptions to hire the best employees.
Your financial planning is the most important. It will determine your funding needs, both short- and long-term. This will be useful when approaching potential investors or meeting with banks to discuss financing.
Consult an accountant or lawyer on the structure of your business.
Your business structure will be determined by the type of business you choose. Your business structure directly impacts how much tax you pay, your ability to raise money, what paperwork you have to file, and your liability. You should now take your business plan and discuss it with an accountant or lawyer to determine the pros of each business type.
- Sole Ownership: Setting up a sole proprietorship is simple, and you have complete control over your business. If you are a sole owner and do not register for any other type of business but still conduct business activities, then this is what you will be considered. A sole proprietorship does not create a separate entity. This means that your business assets and liability are not separated from your assets or liabilities. If your business fails or you have financial difficulties of any kind, you could be held personally responsible for all the debts and obligations the company owes.
- Partnership A partnership allows two or more individuals to run a business. Limited partnerships (LP) or limited liability partnerships are the most common. Limited partnerships only have one general partner who has unlimited liability. All other partners are limited in liability. Limited liability partnerships have similar characteristics to limited partnerships but limit the liability of each owner. A limited liability partnership protects all partners from debts owed to the association. They are not responsible for other partners’ actions.
- Limited-Liability Company (LLC). An LLC combines the advantages of both the partnership and corporation business structures. In most cases, LLCs will protect you against personal liability. If your LLC is sued or goes bankrupt, you won’t have to worry about your assets, such as your car, home, and savings account. You can transfer business income to your income without paying corporate tax. Members of an LLC, however, are considered to be self-employed. You must therefore pay self-employment taxes toward Medicare and Social Security.
- C Corp A Corporation is also known as a C Corp. It is a separate legal entity from its owners. Corporations can make a profit and be taxed. They can also be held legally responsible. C Corps provide the best protection for their owners against personal liability. However, the costs to form a C Corp are higher than those of other structures. C Corps require more detailed record-keeping and operational processes.
- S Corp S Corps are designed to simplify taxation and avoid the complexities of regular C corporations. S corporations allow profits and losses to be transferred directly to business owners’ income without being subject to corporate tax rates.
Register for local and state taxes and get a tax ID.
After you’ve decided what type of business structure to use, you need a tax identification number. An employer identification number (EIN) helps the IRS track your business’s tax status. If your company is incorporated or a partnership, you must obtain an EIN legally. An EIN is also required if you are a sole proprietor and plan to hire employees. Applying online on the IRS site will allow you to obtain an employer identification code quickly and for free.
Most states require that you register your business and pay employment taxes. Some states require additional requirements, such as unemployment insurance. Your attorney or accountant will be able to help you understand the specific needs of your condition.
Establish your business finances.
After you’ve gathered your ID numbers and discussed your plans and financial goals with your accountant, you can set up your bank account and financial documents. Your financial records may be as simple or complex as you want, depending on your decisions. You should at least keep the following:
- A balance sheet is a snapshot of a company’s assets, liabilities, and equity.
- An income report is a profit-and-loss statement that summarizes business revenue and expenses.
- A statement of cash flow that reflects the revenue and expenses incurred by a company during a specified period (usually monthly or quarterly).
After you’ve set up your business finances and tax numbers, stay on top of your tax obligations. It’s best to schedule regular appointments with your bookkeeper or accountant to ensure that everything is noticed.
Prepare to accept credit cards and debit cards.
You will almost certainly need to take credit or debit card payments, no matter what kind of business you run. According to a report from 2018, millennials between 26 and 34 years old are driving the recent growth of credit card usage. Accepting credit card payments will be crucial to the success of your company.
Follow these simple steps to enable your business to accept credit card payments:
- Choose a credit card system or machine: A company will need some hardware to accept credit cards. This may be a counter terminal, a Virtual Terminal, or a Point-of-Sale (POS) system. Today’s POS systems can do much more than process credit card payments. POS systems with more advanced features, such as the Clover Station, can manage employee schedules, track inventory and do much more.
- Create a merchant account. A Merchant account allows businesses to accept payments by credit card and debit card. Merchant Services Accounts are agreements between a merchant, a credit card processor, and the credit card company to settle debit and credit card transactions. The funds are deposited in this account after the transactions have been completed. The money is transferred into a business account within 1-2 working days.
- Create an online presence, and create a payment gateway: According to a report from 2017, e-commerce sales amounted to $2.3 trillion and are expected to reach $4.5 trillion by 2021. eCommerce accounts for almost 10% of all retail sales in the US and is projected to increase by 15% yearly. Online sales are expected to become increasingly crucial for the success of a business over time. A Payment Gateway is essential to conducting online business. This eCommerce application authorizes online payments for e-businesses, online retailers, and other online companies. Payment gateways encrypt sensitive data, such as credit card information, to ensure the information is securely transmitted between the merchant and the customer.
Choose your business location.
The location of your business will also determine whether it succeeds or fails. Is foot traffic necessary for your company? Look for a shop in the town center. Your town may have a business zone where you can get tax incentives for establishing a business. Consider enlisting an experienced commercial realtor. They are familiar with the area you’re considering and can tell you if the location will be on the market soon. Keep in touch with your accountant, as your chosen location could have tax implications.
You must obtain any licenses or permits required.
Different types of businesses may require additional licenses and permits. If you want to open a restaurant, you’ll need a business permit, a liquor license if you intend to serve alcohol, an food service license issued by your local health department, and a food handling permit. This will ensure that your restaurant meets all food storage, preparation, and sanitation regulations. You will need different permits and licenses depending on where you live and what state you are in. Join your local Commerce Organization. They can be an excellent source of information.
Start your own business.
You are ready to open your shop! You already have all you need to be successful. You may feel overwhelmed by the list of things to do, but the most important thing to remember is to remain organized and seek out professionals’ help when needed.