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First Steps To Start a Business

Starting a business is never easy, and success isn't guaranteed. While confidence is important, so is an honest evaluation and market research of your business plan. A clear understanding of the legal aspects of entrepreneurship and a realistic expectation of how your business will make money will set you up for a successful business.

This FindLaw article takes you through the important legal steps and questions to ask when you start your small business.

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Is Entrepreneurship for You?

Not everyone has the characteristics required to be a successful business entrepreneur. Before you quit your day job, read the article Is Entrepreneurship For You? It's an opportunity to think realistically about your work style, strengths, wants, and needs.

Here are some key questions to answer before you get serious about running a business:

  • Are you a self-starter?
  • Can you stay on task, or can you hire employees to help you stay on task?
  • Can you afford not to bring home a salary for the first six months while you get your sole proprietorship up and running?
  • How competitive are you? Have you done a competitive analysis in your area?
  • How comfortable are you with risks?

Opening a small business is a risky venture. There is no guarantee you will make a profit. At the same time, the rewards are far greater than being an employee or freelancer elsewhere. You don't have to split your earnings with anyone else unless you have partners or other members of the company.

Have You Developed and Protected Your Business Idea?

Entrepreneurs are creative people who make things happen. They see potential everywhere. How do you narrow your options to find the type of business and target market right for you? See the page Evaluating Your New Small Business Idea to work through your business idea for viability.

If you have a lot of competition in your space, consider researching your target market. This can allow you to find a niche. This is helpful for your startup marketing strategy.

Let's say you have a business idea you think will succeed. Before you share it with investors, bring on partners, or discuss it with future members, have a confidentiality agreement ready for them to sign. This will allow you to file an injunction to stop them if they use your business idea or confidential information.

Do You Know Startup Business Basics?

Taking a business from an idea to a grand opening requires many steps. For an organized, step-by-step approach, review the article on Startup Basics and print out the Business Startup Checklist. These documents will help you develop a plan of action so you don't miss any details that will make your new business successful.

Have You Created a Business Plan?

business plan guides your new business's creation, financing, and operation. It's not a legal document, but investors, lenders like the Small Business Administration (SBA), and other members will want to view it.

Business plan contents include:

  • Accounting software
  • Analysis (market, cash flow, and break-even)
  • Business accounting
  • Business insurance
  • Business licenses
  • Business model
  • Marketing strategy and marketing plan, including where to find your customer base
  • Management team
  • Product or service details, including pricing
  • Search engine optimization (SEO)
  • Target audience and potential customers

Completing a business plan ensures you've thought through every element of your new business.

Have You Picked a Unique Business Name?

You want to pick a unique name for your business. Having a distinct name sets you apart from competitors. It also allows you to trademark your business name. Before you pick your name and apply to register it with the United States Patent and Trademark Office (USPTO), run a search to see if anyone else is using it. Look on the USPTO database, social media, your local clerk of court, and state databases. A federal trademark will allow you to keep others from taking your name.

If you did not pick a unique name to start your business, you can change your name after formation. This is called doing business as registration. You can file a DBA, a fictitious or assumed name, with your secretary of state or county clerk's office.

Legally Forming Your New Business

You have a range of business structures to choose from when creating your new business.

Do you want complete control over your time and working conditions? Then, you may want to be a sole proprietor. You only answer to yourself for decisions, risks, and rewards. There is a lot of personal liability associated with this business structure. Be sure you have the right kind of liability insurance.

LLCs and corporations are great options if you want to limit personal liability. These legal entities protect the owners or individual members in case of a lawsuit. An LLC can have one or more members. A corporation and a nonprofit require more than one member.

Partnerships, LLCs, and corporations with more than one member allow you to:

  • Collaborate with others
  • Work on business ideas in a group
  • Share the work and the risk of the small business

If you work with another person, do you want them to be equal small business owners with you? Or do you want one person to be the active business manager and the rest equity partners?

FindLaw's Start a Business section includes several articles about business structures. Choose carefully. Once you've registered your business, changing its structure is difficult. At this point, it would be wise to talk to a business startup attorney.

Have You Prepared to File Taxes?

If you operate as a sole proprietor, you don't need a separate tax identification number to file your taxes. Your social security number will allow you to file your business taxes.

But if you operate as anything other than a sole proprietorship or have any employees, you need to get an employer identification number (EIN). This is sometimes called a tax ID. It allows you to file your taxes under that number and apply for sales tax registration in your state.

Some banks require an EIN before allowing you to open a business bank account or a business credit card.

Do You Want To Open a Franchise?

A franchise company is a great way to start your own business, but it's not an inexpensive process. The article Franchise Development and Financing will help you understand how to value a franchise opportunity. It also explains traditional and non-traditional franchise financing methods.

Starting an Online Business

A lot of small businesses have moved to e-commerce and operating online. Not having a retail space can lower your overhead costs.

Even if you collect payments digitally or through credit cards, you should account for sales and state taxes. You may have to pay the IRS federal taxes as part of the income you derive from your online business.

Business Financing

Adequately financing a business is critical to its success.

You can start building business credit once you legally form your business entity.

Hiring a Business Attorney

Before you meet with a business lawyer, review the Confidential Business Startup Information Questionnaire. It will help you gather all the details you need for a productive meeting. The process of starting a new business is complex, but it's also rewarding. A business lawyer can assist you in starting, buying, selling, or closing a business.

Learn About First Steps to Start a Business

First Steps to Start a Business Articles

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