THE STEPS TO STARTING A SUCCESSFUL BUSINESS can be very easy, in fact, easier than you might think, by following these seven simple first steps. Start by asking yourself a few questions and then apply the steps.
What type of business do you want to start? Is it retail? Is it wholesale? Is it products or services? Is it brick-and-mortar or online (or a bit of both)? After you decide what you want to do, you need to decide on a name, location-home vs a rented or purchase physical space- and then the legal or financial elements.
Step 1: Naming Your Business
The first of the steps to starting a successful business is naming your business. My advice would be to think of a few and write them down and rank your favorites. The best names are descriptive of what you do or sell or short and easily remembered
Once you have a few choices, go to the website of your state’s business granting agency (normally the secretary of state) and do a name search for your favorite to see if available. If not, move on to the next name.
Although you may hear a lot of talk about setting up your business in Delaware or Wyoming for various legal or tax benefits, 99% of the time you will not get these benefits unless you grow into a huge corporation and you will have to register in the state you operate in any way, so why do it in two different states unless HUGE advantage created?
One of the reasons that picking a good name early is important is that even if you are not ready to start with an LLC or Corporate structure that require their own name, you can do the filing for a “Doing Business As” (DBA) to reserve the name for future use if needed.
Once you have selected the name and registered it, consider what type of business it is (local or state only or multistate), so that you can decide if you might benefit from trademarking the name, so that it can’t be used in other places.
Step 2: Business Location
The next one of the steps to starting a successful business is to decide if you are a home-based business or need a physical space. If you do start a home-based business, you might need to do some research to see if the city zoning allows your home’s location to be used as such a business.
But if you are not working out of your home, you will need to find a location for your business. This comes with its own research to do. Buy or lease? What is available? What are the zoning restrictions for the areas that are available? How much space is required?
Step 3: Selecting Your Legal Business Structure
The next step is to select your legal business structure. The type of legal business structure also determines how you are taxed. These structures range from simple to complex. It is one of the most important steps to starting a successful business as the structure dictates so many other steps.
The simplest structure is a sole proprietorship. This doesn’t have to be registered with the state (though it might be wise for reasons above) and has only one owner.
Other types of structures you choose must be registered in your state:
- A partnership is the next simplest structure. This is only slightly more complex than the sole proprietorship because since it requires two or more partners, it is best to have a partnership agreement in place on issues like percent of ownership of each, how decisions will be made, etc. Needs to be registered with the state.
- Limited Partnerships consist of one general partner and one or more limited partners.
- Limited Liability Company– these can be single or multi-owner structures. Must register with the state and report each year to state as well as have an operating agreement in place and meetings at least once a year.
- Corporations are the most complex of the business structures and come with the most rules and requirements. They can come in a few varieties.
- S-Corp
- C-Corp
- B-Corp
- Non-profit
- Collective
Step 4: Applying for a Tax ID Number (Employer ID)
Once you have a name, location (address), and have chosen your structure, you need to apply for a Tax ID Number also called an Employer ID. This number acts as a unique identifier for your business when filling out documents like employee pay W-2, loan applications, bank accounts, etc. You can apply here at the IRS website
Here is an article about the 4 ways you can apply for an EIN.
Beware of fake scam application sites, the only one you need is the IRS website, if applying online.
Step 5: Apply for a State Sales Tax Permit
If you are selling any product or service that is subject to a sales tax in your state, you MUST collect taxes from the customer and pay the state those taxes. Because of this you first need to apply for a seller’s permit from your state’s taxing authority.
Also know that if you sell over the internet, you may be required to collect, report, and pay sales tax for those internet sales. A Supreme Court decision may be opening up the number of states that require this collection.
Step 6: Obtain Local License and Permit
The next step to creating a successful business is obtaining needed licenses and permits. Many businesses are required to obtain a local license with the city they operate in. There are also permits that must be considered from a construction permit for your new physical location to zoning permits for your type of business to privilege licenses that are due each year.
Step 7: Applying for a Business Checking Account and Credit Cards
Once you have received your tax ID, one of the next steps to starting a successful business is to use that tax ID number to set up a business checking account. It is important (even required for some structures) to have a separate checking account from the owner(s) ’s personal account. This not only protects you from filing expenses and profits wrong on your tax returns, but it looks more professional when applying for loans or other credits.
[I am a believer in the Profit First Method of accounting, which requires multiple accounts. You can check out what it is all about and purchase this book to learn more here. PROFIT FIRST]
It will also help you to apply for at least one or more credit cards in the business name. Not only does this look professional and help you to establish business credit for better interest rates in the future (if paying on time every time), but there may be some expenses that you must have a credit card on file with to acquire (ex-online ads with Facebook, Google, Bing, etc.)
Creating a Plan to the 7 First Steps to Starting a Successful Business
This is a strategic plan in which you decide in detail:
- what you are selling
- how much those items cost
- how much you will price your product or service
- who you are selling to
- how much utilities and upkeep are projected to be
- determining competition
- advertising and promotions for your launch and beyond
A detailed strategic plan can help you not only in understanding your needs and the steps to starting a successful business but will be something to present to lenders if you need money to begin or run the business.