Steps in Starting a Small Business

Many people dream of starting their own small business. Some people want to pursue a lifelong passion, while others want to start a business for the freedom and flexibility it can provide. Still others start businesses to increase their earning power. Whatever your reason, starting a business is easier than ever, and you can do so by following the steps below.

Difficulty:

Moderately Challenging

Instructions

1. Decide what type of business you want to start. Consider your interests, your passions, your personality, and the current marketplace in the industry you'd like to enter. Is it something that you'll enjoy spending a great deal of time doing? Starting a business requires a serious amount of time and dedication, and you want to be sure that you'll enjoy devoting that amount of energy to your idea.

2. Create a business plan. Your business plan is a detailed outline of the purpose of your business and how you plan to run your business. In this plan, you should include your mission statement, an evaluation of your competition, pricing structures, whether money is required to start it and how you plan to get that money, and details of the types of services or products you plan to sell.

3. Decide on a name for your business. If you choose a name that is a combination of your own last name and a description of your business, such as "Smith Accounting," you don't need to register your name. If you are using any other type of name, you'll have to file to register your fictitious name.

4. Consult an attorney to decide on a legal structure for your business, and submit the required paperwork. A sole proprietorship is the easiest type of business to start, and is ideal for service oriented businesses that involve only one person. Partnerships are similar, but involve two parties. A corporation or limited liability company might be a better option if you will need to hire employees right away. You'll need the protection that a corporation or LLC provides if you want to shield your personal assets from potential lawsuits brought against your business.

5. Register your business with your local municipality and school district. You'll be responsible for paying your own taxes, and not being properly registered can result in penalties.

6. Hire an accountant, or purchase accounting software such as QuickBooks to keep track of your income and business expenses. Be sure to have a separate bank account for your business, particularly if you are operating a corporation or LLC, because mixing your personal finances with that of your business can eliminate the protection offered by these legal business structures.

7. Congratulations! You're in business. Now is the time to start marketing your new venture. Be sure to keep track of all your income and expenses accurately, because you want to save as much as you can on taxes, and you certainly don't want to be audited by the IRS.

Tips & Warnings

• While you can fill out and submit your own paperwork to set up a business, it's highly advisable to seek the advice of an attorney. Only an experienced business attorney can help you decide the best legal structure for your business that will offer you the protection that you need.

• You should utilize the services of an accountant to file your taxes each year, and it's advisable to consult an accountant when you are starting up your business to determine different filing requirements that may apply to you now that you're a business owner.

• Under a sole proprietorship and a partnership, you'll have to pay self-employment taxes on income that you earn through your business. Other structures may be subject to double-taxation, which occurs when the profits of a business are taxed, and then the owner's income is taxed again at the personal level. Only an accountant or attorney will be able to advise you which option will work best in your situation.