If your side hustle has grown, your hobby has started making money, or you've been tinkering with an idea for months, it may be time to start a business. Here's a 13-step checklist to help you get your new business off the ground.
1. Get into a business mindset
Do whatever it takes to convince yourself that this is not a random thought, a little side gig, or "just a hobby." If you're going to run a successful business, you need to start thinking like a business owner, and that means getting serious about marketing, cash flow, and planning. You may also want to look inward, and address any fears-or learning needs-you may have specific to starting the business.
2. Research the market
Take a step back and look at the business you want to start. Is there a market for your product or service? Who are your potential customers or clients, and how will they find you? Who is your competition, and what can you do differently or better? Bounce your ideas off some other business owners and see what they say. Listen to feedback and fine-tune your concept-but give yourself a deadline, so you don't get stuck in this step.
3. Run the numbers
Figure out how much money it will take to get your business up and running, and how much you will need to stay in operation until you make a profit. If you don't have enough cash, explore ways to finance your business, which may include securing a bank loan or SBA (Small Business Administration) loan, attracting one or more investors, or soliciting family and friends, either individually or via crowdfunding.
4. Write a business plan
There are plenty of templates available online or at the library. The folks at your local SCORE center also can help. (SCORE is a nonprofit whose volunteer mentors are committed to helping small business owners succeed.) It's tempting to skip this step, but writing a business plan will help you identify and solve any weaknesses in your business idea. And it's an essential document if you're looking for a bank loan, grant, or even a contribution from family and friends.
5. Get legal advice
Attorneys help you manage the risks of being a business owner. An attorney can advise you on whether your business should be a corporation, an LLC, or something else. An attorney can define your relationship with your co-owners, review leases, and set you up with the right kinds of contracts and forms. And your attorney is someone you can call with additional questions after your business is up and running.
6. Choose a great name
This is one of the more creative steps. Your business needs the right name. A good business name is unique, memorable, easy to pronounce, and complies with your state's rules on business names. For example, most states won't let you choose a name that's potentially misleading or is the same as another business's name. Also consider how the name will transfer to online uses, including social media.
7. Form your business
Forming a business means filing paperwork with the state and paying a fee. Within a few days to a few weeks, you'll receive confirmation that your business is official. What's required for doing business in the state will vary by state.
8. Get a tax ID number
Most businesses are required to have a federal tax ID number, also known as an Employer Identification Number, or EIN. You can apply for one on the Internal Revenue Service website, or you can get your tax ID number as part of a business formation package.
9. Open a business bank account
Search banks in your area for business accounts with low fees and/or bonuses for signing up. While you're at it, get a business credit card that offers reward points. Don't use your personal bank account for your business banking. You'll have a mess at tax time, and you could invalidate the liability protection you get from having a corporation or LLC.
10. Talk to an accountant
Don't wait until your first tax return is due to talk to an accountant. A good accountant can advise you on the best tax filing status for your business, help you stay on top of deadlines, and answer questions you may have about business deductions, payroll, and state and local taxes.
11. Check with your state taxation department.
You may need to open an account for sales tax, payroll taxes, and any other taxes your state collects.
12. Get the necessary business licenses and permits.
There may be local business licenses, permits, or tax accounts that are required for your business. You can contact your city or county to find out what's required in your industry or use an online resource that can do the legwork for you.
13. Set up payroll, if you have employees.
Many small businesses use payroll services to simplify the process and make sure everything is done right.
Owning a small business is an exciting journey. When you start with a good plan and a solid legal and financial foundation, you'll be setting yourself up for success.