During each month of 2009, entrepreneurs created 558,000 new businesses, according to the 2010 Kauffman Index of Entrepreneurial Activity. Starting a new business venture can be exciting, but it is easy to become overwhelmed by everything you need to do. Although there are many important aspects to starting a new business, some basic steps come first. Follow these tips to establish a firm foundation before you actually open the doors to your business venture.
Determine the Legal Business Structure
The legal structure of your business determines your financial and legal liability for business transactions as well as tax liabilities to the Internal Revenue Service (IRS), along with state and local taxes. For many entrepreneurs, a sole proprietorship is the least complicated and easiest legal structure for a business. In many instances, no special licensing is required for a sole proprietorship, especially if you use your own name as the name of the business and your business is not a retail or food-handling establishment, explains business website AllBusiness and legal advice web portal Nolo. However, sole proprietors are personally liable for the financial and legal obligations of the business. Other legal structures for businesses include partnerships, S corporations, C corporations, limited liability corporations and non-profit corporations, according to AllBusiness and the Small Business Administration (SBA).
File the Necessary Forms
If you do not use your own name as the legal name of your business, you must file a business name registration, often known as a "Doing Business As" or DBA certificate, with the appropriate authority, according to the Business.gov. The IRS requires an Employer Identification Number (EIN) for all businesses except for sole proprietorships, for which an EIN is optional. Banks also often require an EIN and a DBA or corporate license in order to establish business bank accounts.
Businesses that obtain contracts with the federal government must obtain a unique "data universal numbering system," or D-U-N-S number, which is available at no charge from the Dun and Bradstreet website. Brick-and-mortar or online retail establishments must usually obtain sales tax licensing from the state. Additionally, local municipalities may require special licensing for home-based businesses that generate foot traffic or for signs posted outside the business owner's home, according to Nolo.
Write a Business Plan
A business plan has two goals: describing your business and demonstrating how it will become profitable, according to Nolo. Many banks and venture capitalists require a detailed business plan before they will consider providing funding for or extending credit to a business, according to AllBusiness. The essential elements of a business plan include a basic description of the business, qualifications for all principal officers of the business, financial and income data, including credit profiles for principal officers, and a marketing plan describing how your business will reach its customers and generate revenue, according to the SBA.
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