How to Set Up a Private Business

Setting up a private business involves a large amount of planning as well as some paperwork.

According to the website of SCORE and their sources at the Small Business Administration, privately held small businesses "employ just over half of the country's private sector workforce." Small businesses, occasionally called privately-held businesses or simply private businesses, truly are the backbone of the American economy. Setting up a private business is fairly straightforward in terms of tasks and procedures that must be completed. More important than the procedural steps though, is the business plan behind the company. For a private business to be successful, the owner must build and execute a solid business plan and have enough capital to see the plan through to completion.

Instructions

1. Develop a solid business plan. Every business plan should include an overview of your industry, an overview of your product or service, management bios, a marketing plan and some financial projections. It would be ill-advised for any entrepreneur to attempt to start a private business without a solid business plan.

2. Setup a legal entity. Most businesses today are organized as either Limited Liability Companies (LLCs) or Corporations. Creating an LLC or Corporation is a fairly simple task. You'll need to choose a name that is not already in use in your state and file some paperwork with your Secretary of State. Most states charge a filing fee of $75-$150 for processing the paperwork.

3. Get an EIN number. An EIN number is a tax payer identification number for businesses, it identifies businesses like Social Security numbers identify citizens. Fill out Internal Revenue Service (IRS) form SS-4 to obtain an EIN for your business or use the on line EIN filing application at IRS.gov.

4. Open a business checking account. Head to your local bank and ask to open a business checking account. The banker will ask for your EIN as well as the forms you filled with the Secretary of State to set up your corporation or LLC. Most banks will require you to make an initial deposit of $100 or more to open the account. You should plan on spending $30 to $40 on ordering a set of business checks as well. This fee is often paid to a check printing company rather than the bank.

5. Execute your business plan. Now that you're officially in business, it's time to run your business plan.

Tips & Warnings

• Professional advisers such as attorneys and certified public accountants (CPAs) can be quite helpful in setting up a private business.

• Most businesses that fail fail because of a lack of capital and/or a well thought-out business plan. Don't try to start a private business without both in place.

References

• Score: "Small Business Statistics"
• Nolo: "How to Form an LLC"
• Nolo: "How to Form an Corporation"
• SBA: "Business Plan Basics"

Resources

• IRS: "Form SS-4"