Criteria for Starting a Business
According to the most recent United States Census data, as of 2008 there were over 7.6 million businesses in the United States. Starting a new business is an intriguing idea for many people; however, there are also specific criteria you need to know that will help you avoid common pitfalls.
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Business Plan
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One important criterion for starting a business is creating a business plan. According to the U.S. Small Business Administration, a business plan should contain several important elements. An executive summary is the first section of your business plan and includes a description of your business and your goals and objectives. A competitive analysis section contains a detailed look at the strengths and weaknesses of your competitors in the market. A management and operation section includes details about your personnel and operating principles. A financial analysis section includes estimates of your sales and expenses and possibly a request for funding. Finally, your business plan should also include supporting documents like tax returns of partners in the business; any contract, licenses and other important paperwork; and copies of any leases or purchase agreements for building space.
Tax Registration
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An Employer Identification Number, also known as an EIN or Federal Tax Identification Number, is a federal tax number the government uses to identify a business entity. Apply for an EIN online for free on the Internal Revenue Service website. In addition to business taxes required by the federal government, you will have to pay state and local taxes. Each state has its own tax laws, so check with your state to see what you need to do.
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Business Structure
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When beginning a business, you also have to decide the type of legal business structure you want to establish. The most common forms of business are a sole proprietorship, partnership, corporation, limited liability company and S corporation. Legal and tax considerations for different business structures vary from state to state.
Financing
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There are various ways to finance your business, including personal loans from friends and family, credit cards, bank loans and SBA loans. SBA loans are only available after you get turned down for a bank loan, and there are several different types. The 7(a) Loan Program includes financial help for businesses with special requirements, such as businesses that export products to foreign countries and businesses that operate in rural areas. The Microloan Program provides small, short-term loans to small businesses.
Marketing
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Another important criterion when starting a business is marketing, which refers to how you will spread the word about your product or service to potential customers. Marketing spans many topics, so it helps to create a separate marketing plan. Your plan should include your marketing objectives, target market, competitive strengths and weaknesses and marketing strategies and tactics.
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References
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