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How to Start a Business Overview
You’ve got a great business idea that you’re passionate about and ready to get started, but unsure where to begin. No worries, we got you. Whether you’re starting a blog, online store, or creative business, we’ll cover the essential steps you need to take to get started.
First, we want to say: Get it, Girl! We’re thrilled that you’ve decided to boldly go after your dream and create the life you desire. Starting your own business, working towards financial independence, and investing in yourself is no small feat. So we would like to give you the tools needed to position you for success from the start.
This post will walk you through how to start a business successfully. It may seem overwhelming initially, but take one step at a time, and you’ll be on your way to your new future in no time. Grab a cup of coffee or tea, and let’s get this party started.
12 Step Guide on How to Start a Business
Step 1: Do Your Research
I know, I know, this doesn’t quite sound like the party I mentioned earlier lol. But to be successful, research is critical when starting a business. Market research will help you gather information about potential customers and businesses already operating in your industry or niche. This information can be used to find a competitive advantage for your business.
For a small business to be successful, it must solve a problem, fulfill a need, or offer something the market wants. Research helps you identify this need and who needs it, explore the strengths and weaknesses of companies offering similar products and services, and look for gaps or unique offerings that can make your business stand out.
Step 2: Write Your Business Plan
A good business plan guides you through each stage of starting and managing your business. To be honest, this step was the one I struggled with the most because it felt a bit overwhelming. The key is to spend some time working through it step by step. Creating a business plan forced me to think through all the key elements of my business.
The good news is that there are different types of business plans. You can choose the one that works best for the kind of business you’re creating.
If you intend to seek financial support from an investor or a bank, a traditional business plan is necessary. This kind of business plan is generally long and thorough and has a standard set of sections that investors and banks look for when validating your idea.
If you don’t need financial support, a simple business plan is all you need. At the end of the day, the goal is to ensure that you get clear on what you hope to achieve and how you plan to do it.
Step 3: Plan Your Finances
Let’s talk money for a second. You don’t necessarily need much money to start a small business. Still, it will involve some initial investment and the ability to cover ongoing expenses before you start making a profit. Focus only on the essential things you need. You can grow your business in small increments. Don’t go wild, spend all your money on things you don’t need, and put yourself in unnecessary debt.
Plan your business finances and manage them wisely. Create a spreadsheet and write down your start-up costs (business registration fee, licenses, permits, etc.) and what you need to keep your business running for at least one year (rent, utilities, marketing, etc.). If you don’t have that amount on hand, you’ll need to either raise or borrow the capital.
There are several ways you can fund your small business, including:
Step 4: Choose a Business Structure
The legal structure you choose for your business will impact your business registration requirements, how much you pay in taxes, and your personal liability. Your safest bet is forming a Limited Liability Company (LLC) for a small business or entrepreneur. An LLC protects your personal assets should something go wrong in the business. To better understand the different types of business structures, we’re going to explore them briefly.
There are four common types of business structures:
- Sole proprietorship
- Limited liability company (LLC)
Let’s talk through the pros and cons of each.
A sole proprietorship is a business that’s owned and run by one person, where the government makes no legal distinction between the person who owns the business and the business itself. You’re automatically considered a sole proprietorship if you conduct business activities but don’t register as any other kind of business.
Pros: It’s easy to form, and you have complete control of your business. Tax preparation is simple since a sole proprietorship is not taxed separately from its owner.
Cons: Since the owner and the business are legally the same, the owner is personally liable for all the business’s debts and obligations. It can also be more challenging to raise money since banks are hesitant to lend to sole proprietorships.
According to the U.S Small Business Association, Sole proprietorships can be the right choice for low-risk businesses and owners who want to test their business idea before forming a more formal company.
A partnership is a single business where two or more people share ownership, and each owner contributes to all aspects of the company and shares in the profits and losses of the business.
Pros: It’s pretty easy and inexpensive to form a partnership. When you have two or more people invested in a business, you can pool resources and benefit from each others’ skills and expertise.
Cons: Like a sole proprietor, partners have full, shared liability if the business goes south. In a partnership, you are responsible for your actions and the actions of your partner(s). You can protect against this if you form a limited liability partnership. Also, whenever you have two or more people making decisions, there’s bound to be disagreements. Ensure that you document how decisions will be made in the company and how profits will be shared, especially if things go sideways.
Limited Liability Company (LLC)
A limited liability company (LLC) offers the personal liability protection of a corporation with the pass-through taxation of a sole proprietorship or partnership. LLCs can be owned by one or more people, who are known as LLC “members.”
Pros: Forming an LLC allows you to protect your personal assets if your business gets sued. It’s the most popular choice for entrepreneurs and small businesses for this reason.
According to TRUIC, an LLC’s profits go directly to its owners, who then report their share of the profits on their individual tax returns. Hence, LLC’s profits are only taxed once. This is known as pass-through taxation.
A corporation is a legal entity that is separate and distinct from its owners and has most of the rights and responsibilities that an individual possesses. Corporations can enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes. Corporations are more complex than the other business structures and are usually for larger, established companies with multiple employees.
Pros: Getting loans or investments is usually easier for corporations. Similar to an LLC, corporations also provide the best protection for personal assets. Shareholders may take part in the profits through dividends and stock appreciation but are not personally liable for the company’s debts.
Cons: Corporations are more complex and have more costly administrative fees and more complicated tax and legal requirements.
To get a more in-depth understanding of each business structure, check out the U.S Small Business Administration’s Choose a Business Structure Guide.
Okay, whew! That was a lot to take in. Take a deep breath, inhale, and exhale. Alright, let’s continue.
Step 5: Choose Your Business Name
Choosing the right name for your business isn’t always easy, but with a little creativity and market research, you’ll be able to find the perfect name that fits your brand. Once you’ve selected the name that you love, make sure that the name is available.
You can find out if your desired business name is available by following a few simple steps:
- Use Google to see if another company or website has your preferred name;
- Conduct a domain name search to see if someone owns the domain. You can use Google domains or Namecheap to do this;
- Search your state’s business registrar to see if anyone has used that name to register as a business in your state;
- Do a trademark search to ensure that the name has not been trademarked and avoid expensive issues down the road;
- Search social media networks like Facebook, Youtube, Twitter, Instagram, and Pinterest to make sure no one has your name. You can always be creative with your social media handles, but I still like to double-check.
Protect Your Business Name
If you’ve done all your research and your desired name is available, go ahead and grab the domain and all the social media handles. You can purchase a domain name with Bluehost, NameCheap, or Google Domains. I usually get the .com, .net, and .info extensions of the domain I desire.
If you can, you should also trademark your business name. A trademark protects words, names, symbols, and logos that distinguish goods and services. Filing for a trademark costs less than $300, and you can learn how to do it here.
Step 6: Register Your Business
Once you’ve identified your business name and conducted your research, you should register your business. Your business location and structure will determine how you’ll need to register your business. If you don’t register your business, you could miss out on personal liability protection, legal benefits, and tax benefits.
For most small businesses, registering your business is as simple as filing your business name with state and local governments. As mentioned earlier, I would go with the option of registering your business as an LLC. But as always, do your research on what would work best for you.
To find more information on doing business in your state, you can view the list of state government websites that walk you through what you need to set up a business in your state.
Step 7: Get Federal and State Tax IDs
Your state tax ID and federal tax ID numbers — also known as an Employer Identification Number (EIN) — work as a personal social security number, but for your business. You need it to pay federal taxes, hire employees, open a bank account, and apply for business licenses and permits. It’s free to apply for an EIN, and you should do it right after you register your business.
Step 8: Apply for Licenses and Permits
Keep your business running smoothly by staying legally compliant. The licenses and permits you need for your business will vary by industry, state, location, and other factors.
You’ll need to get a federal license or permit if your business activities are regulated by a federal agency. Check to see if any of your business activities are listed here, and then check with the right federal agency to see how to apply.
Step 9: Open a Business Account
It’s best practice to keep your business and personal funds separate. Depending on your business structure, you may be required to have a business account. A small business account is easy to set up and will help you handle legal, tax, and day-to-day expenses.
Some documentation you will need to bring to the bank to open a small business account include:
- Employer Identification Number (EIN)
- Business’s Formation Documents
- Ownership Agreements (if applicable)
- Business License (if applicable)
You can check with your bank to see what types of small business account options they offer. Rates, fees, and benefits vary from bank to bank, so shop around and select the one that’s best for you.
If you plan to accept payments online, you can sign up for a PayPal or Stripe business account. Both options allow you to accept debit/credit card payments online and will enable you to transfer funds to your business bank account.
Step 10: Set Up Your Business Location
Setting up your place of business is one of the most important decisions you’ll make. Whether you’re setting up a home office, a shared or private office space, or a retail location, ensure you have a designated area where you can focus and get work done.
Step 11: Start Building Your Online Presence
Once you’ve got all the legal stuff out the way, you can begin building your small business’s core marketing elements, including your website, blog, email tool, and social media accounts.
Here are the essential steps you need to take:
- Get a domain name and website hosting
- Create a website
- Create a business email
- Create social media accounts
- Create & build an email list
Step 12: Find a Supportive Community
Starting your own business is usually filled with passion and excitement but sometimes can be overwhelming. Having a supportive community you can go to for advice, encouragement, and inspiration is good. As a business owner, you won’t always know the answer, but someone who has been where you are and has made it through to the other side will be able to help you along the way.
You can find an online community through various Facebook groups related to your niche or by reaching out to someone who successfully does what you would like to do and ask them if they would be your mentor.
I look forward to the beauty that you’ll create in this world and would love to support you on your journey. Click on the button below to learn more about our 1:1 business coaching program.
1:1 Business Coaching
Our Passion to Profit eight-week coaching program is designed to help you turn your passion into a profitable business so that you can build a life doing work you love.
Once you’ve completed these 12 steps to start your business, you will have covered all the most important bases. Remember to take it one step at a time. Give yourself time to think through carefully what you would like to create, who you would like to build it for, and how their lives will be impacted by the services or products you offer. Throughout this process, also remember to be patient with yourself.
You can do this! No one is you, and that is your superpower.
Disclaimer: This article is not meant to be taken as professional legal or financial advice. I am not a tax or legal professional and am not liable for misinformation or missing information in the above article. For financial and legal advice, please contact an accountant, financial advisor, or lawyer.