Starting a Business: Do's and Don'ts

Navigating the initial stages of launching your own small business can be exciting and overwhelming. There is no shortage of information on how to start a business. It can be confusing to know where to start.

FindLaw breaks down the basics of common actions for pitfalls and success when starting a successful business.

Learn more about starting a business, including step-by-step guides for various business types and industries, in FindLaw's Starting a Business section.

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Embrace These Actions When Starting Your Business

Seek advice and use the resources from organizations like the Small Business Administration (SBA) and your local Small Business Development Center. Discuss your business idea with a mentor from the Senior Corps of Retired Executives (SCORE). Some local governments also offer resources to entrepreneurs opening a business in their city or county.

Network with successful entrepreneurs. Seasoned business owners often have a wealth of insight. They have created business plans and launched new business ideas. Networking allows you to learn from their successes and failures. Their practical advice may help you navigate your business challenges more effectively.

Prepare a detailed written business plan. The effort you put in at this early stage will pay off in many ways later on. You will also need a strong business plan to secure funding for your business, either through business loans or investors.

Tap into your community. Network with your local chamber of commerce, civic organizations, and trade groups. This allows you to find established companies that could be suppliers and business partners who can join your company board. You may even discover potential customers.

Use market research to get to know your potential customer base. The insights you gain from interaction with your target market will prove invaluable. This research on your target audience can help you:

• Tweak your products and services
• Set your pricing
• Enhance your business model
• Develop an effective marketing strategy
• Establish a strong social media presence

Invest in technology. This is the age of e-commerce. Even if you have a brick-and-mortar shop, many new businesses need an online business portal to reach potential customers. Ways to leverage technology include:

• Maintain engaging social media profiles with fresh, current content
• Use email marketing to keep customers up-to-date with promotions, events, and product launches
• Implement point-of-sale (POS) systems to optimize sales transactions, manage inventory, and track sales data
• Learn about basic search engine optimization (SEO) practices to help increase online visibility
• Use e-commerce platforms (like Shopify and Squarespace) to sell your products or services
• Take advantage of business accounting software to help streamline your bookkeeping and business taxes
• Invest in cybersecurity measures to protect sensitive business and customer data

Talk with a business attorney as early as possible. Getting legal help early on can help you avoid major legal problems later. To get the most out of working with an attorney, disclose everything about your proposed startup and past business experience, both positive and negative.

Discuss the advantages and disadvantages of the various types of business structures. Choosing the proper legal structure for your business is your first and most important decision. How you decide to organize your business will impact your tax structure and liability.

Limit your personal liability for your business by incorporating your business or organizing it as a limited liability company (LLC).

Consider the ways you can further limit your personal and corporate liability with the following contracts and documentation:

• Formal partnership agreements
• Thorough employee handbook
• Written employment agreements
• Detailed buy-sell agreements
• Up-to-date supplier contracts

Talk to a tax or business finance professional. Using good bookkeeping and business practices from the start saves headaches later.

Get familiar with the particular business laws and regulations of your state.

Secure adequate business liability insurance. Consider your business's unique needs and potential liabilities. Having the right business insurance in place may help avoid the financial ruin of your company in the event of a legal claim. If you have even one employee, you will also need workers' compensation insurance.

Protect your customers' personal information. A data leak can be detrimental, tarnishing your company's image and leading customers to lose trust in your business. Invest in software to protect your company's technology from cyber-attacks. You may also want to consult a cybersecurity professional for help.

Avoid These Pitfalls When Starting Your Business

Don't try to do everything yourself. Setting up a business is complicated. A supportive professional network is key to success, especially during challenging times. Consider enlisting the following help:

• Get advice from experienced small business owners
• Hire skilled employees and independent contractors when you need them, including short-term experts
• Get advice from a business law attorney for help with important decisions that could have legal consequences
• Used LinkedIn and online forums to connect with other business owners and professionals in your industry

Don't forget to trademark your business name, logo, and other intellectual property.

Don't assume a DBA protects you from personal liability. A DBA (or “doing business as") is a registration that allows your business to operate under a different name than its legal business entity name. Sole proprietorships registering a DBA are still personally liable for their business debts and legal obligations.

Don't neglect forming and following a management plan. If you have co-founders or business partners, work with a business attorney on a contract that details everyone's responsibilities.

Don't start your business under-capitalized. Insufficient startup funds are the most common reason for new business failure.

• Look for small business loans and grants
• Pay close attention to cash flow
• Never divert money you've set aside to pay withholding taxes into operation

The IRS has a long reach, and diverting withholding taxes violates tax laws. The IRS also imposes penalties and interest for failure to deposit withheld taxes.

Don't make expensive office space and furnishings a high priority unless you are in an "image" business (like photography or advertising). High startup costs can make or break a business, so don't do more than you need to. Look at your marketing plan for guidance on the image you want to project.

Don't print your stationery, business cards, and promotional materials until you've had a trademark attorney search existing state and federal trademarks and pending trademark applications.

Don't put off getting the proper business licenses, permits, and professional licenses needed for your business. What you need will depend on your area and type of business.

Don't sign company contracts in your individual capacity. Rather, sign them on behalf of the company as an officer. This will help you avoid personal liability.

Don't pass up free publicity opportunities. Build brand awareness by connecting with local news outlets and social media influencers. Social media mentions are a great way to spread the word about your business. A story about your grand opening in the local newspaper or on a televised newscast can get your business even more reach.

Don't put off getting an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). You should do this as soon as you register your business. You will need this tax ID number to:

• Hire your first employee
• File federal business taxes
• Open a business bank account

Don't forget to consider zoning and legal restrictions in the area in which you plan to do business. How your business affects your neighbors matters—and your neighborhood may contain some of your best customers.

Don't take out a business credit card without careful research. Research different credit providers' card terms and interest rates. Many business credit cards also offer rewards and perks.

Need More Help? Talk to a Business Attorney

Successful entrepreneurship is more than knowing what to do or avoid. You must put this into practice. You may need more help with certain aspects of your business. Having expert legal guidance on your side can give your new business the best chance to thrive.

Contact a business and commercial law attorney licensed in your area for legal help with your new business venture. An experienced attorney will know how to respond to various business challenges you may face—from liability protection to filing your business taxes.