How to Start a Small Business
04/05/2023
How to Start a Small Business
The United States Chamber of Congress estimates that there are around 31.7 million small business in the United States. Starting a business includes a lot of moving parts as well as following local, state, and federal rules. Don’t worry, though: once you’ve condensed the information, a simple checklist can get you well on your way to success!
__ Conduct Market Research
Whatever your idea is, there needs to be a viable market for it. Look at the area around you and the culture of those in the area. Are there already three boba shops in town? Is your idea unique enough to draw business, but still conventional enough to draw wide attention? Who is your primary market and do they have the capital to bring to your business? All of these are important things to investigate as a first step.
__ Write a Business Plan
The next step is to use this market research to develop a business plan. If you are in Ohio, you can visit https://clients.ohiosbdc.ohio.gov/DocumentMaster.aspx?doc=2462 for a worksheet.
This plan will define what your company must accomplish, acquire, and learn before it can get started. Most business plans will be a traditional business or a lean startup. A traditional business will need to develop a much more robust plan. It will need to include sections like an executive summary, a description of proposed services or products, and any financial projections that can be made. A lean startup would only require an overview summarizing the high-level ideas of your business.
Which type of business plan you write will depend entirely upon which type of funding you pursue. A lean plan would be appropriate if you do not seek outside funding. However, if you plan to take out a business loan or look for investors, they will require more in-depth information to secure their investment.
__ Acquire Funding
Funding for a small business can often be the most difficult part of getting started. Using the business plan you made, decide the best means of funding for your small business. The federal government, traditional banks, and private investors are all avenues to explore for funding.
__ Choose a Business Structure
Choosing the correct business structure is extremely important as it will determine how you file your taxes, what types of licenses you will need, and even if you can hire employees. There are four main business structures: sole proprietorship, LLC (Limited Liability Corporation), partnership, and corporation. Each has its own benefits and drawbacks. * A sole proprietorship is easiest for filing taxes, but there is no legal separation between yourself and the company. This means all personal assets are at risk in the event of a lawsuit. An LLC creates a legal separation between you and the business and has easy taxes to file. A partnership would be between two or more owners. Lastly, a corporation is a separate legal entity owned by shareholders.
*It is recommended to consult an accountant to learn more about what business structure is right for you.
__ Register your business and apply for a federal tax ID number
While you may have already come up with a name for your business in your business plan, you need register the business in your state and any other required entities; usually this information can be found on the Secretary of State website. Once you have done this, it is time to apply for an EIN (Employer Identification Number) with the federal government. You cannot move forward until you have an EIN.
__ Open a Business Bank Account
Using that EIN number, the next step is to open a business banking account. All deposits for the business MUST be deposited into a business bank account. When considering the right business account for you, consider the bank’s offerings. Alongside a robust account offering, The Savings Bank also offers a wide range of business services, such as ACH/wire services and positive pay fraud prevention, to name just a few!
As you will find, there are many little check list items in between the major ones. Opening a small business is no small feat, and we want to help lessen the surprises along the way. If you have any questions about opening a business account, The Savings Bank is here for you! Visit your local branch and speak with one of our business bankers today.
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Sources:
https://clients.ohiosbdc.ohio.gov/DocumentMaster.aspx?doc=2462
https://www.sba.gov/business-guide/10-steps-start-your-business
https://www.uschamber.com/co/start/startup/starting-small-business-at-home