Starting a new business can be the beginning of a rewarding journey, however, starting a new business requires proper preparation and planning. To get a business off to a smooth start, follow these five tips from the U.S. Small Business Administration.
Determine Legal Structure
Decide on the appropriate ownership form for the business. Legal organizational structure will be determined by how many owners the business has and what the company’s focus is. As choosing the correct legal structure, and it associated tax implications and consequences, is one of the most crucial aspects of starting a business, an attorney should be consulted. Typical types of business entities include:
• Sole proprietorship • Partnership • Limited Liability Company • C Corporation • S Corporation • Nonprofit
Register the Business Name
To protect the business and its name, the “Doing Business As,” also known as the “DBA,” name must be legally registered with the state where the business is organized. Additionally, registering the business name with the U.S. Patent and Trademark office in Washington, D.C. will protect the business name against infringement.
Also referred to as a trade name, registering the business name protects the name from unauthorized uses by another person or company. Business names can be the actual name of the business owner in a sole proprietorship, such as “John Doe Inc.,” or a “fictitious” name such as “Doe Boys Bakery.” In most states, if a person wishes to start a business under any name other than their own, they are required by law to resister the name. Check with the city or county clerk’s office, the secretary of state or consult a lawyer.
Licenses and Permits
Depending on the type of business, its industry and location, many jurisdictions, and the federal government, require certain business to be licensed and may require any number of associated permits. Because the requirements for permits and licenses can vary greatly from state to state, and even from city to city within the same state, check with local offices. Because not obtaining the proper documentation can cause a host of legal problems down the road, including fines and being prevented from operating, an attorney should be consulted.
Write a Business Plan
The business plan should start with an executive summary, briefly outlining the company’s current position, the proposed direction of the company and what steps will be taken to make the business successful. Include a mission statement explaining what the business does, and why it does it. Outline company information including location, date of formation, names of founders, officers and their roles and responsibilities and the total number of employees. Explain products or services offered and summarize growth highlights with charts and graphs. If seeking funding, include financials detailing current banking and investor relationships, if any.
Securing Funding
Depending on the type of business, a variety of funding options may be available. Traditional bank loans will require a thoroughly fleshed out business plan as well as financial records of the company’s owners.
Private investors are options, but, aside from family and friends, most professional investors will most often require some form of collateral, including possibly a stake in the business, before they will be willing to put up significant amounts of capital.
Private foundation and government grants are viable options for legally registered non-profit companies. However, most grant makers will require the organization to have been granted tax exempt status from the IRS.
The Small Business Administration also offers three types of loan programs:
• The CDC/504 Loan Program is an economic development program offering small businesses financing to promote growth, and job creation. • The 7(a) Loan Program offers loans to businesses with special situations, such as making exports to foreign countries or businesses which operate in or serve rural locations. • The Microloan Program provides short-term loans to help certain types of not-for-profit companies.