When you think about starting a business, you may imagine your customers, your products, your logo, your Instagram feed — and yourself in the middle of it all. But unless you're a lawyer or an accountant, you probably don't daydream about writing a business plan or filing incorporation documents with the state.
Yet these more mundane tasks are critical to giving your business a solid legal and financial foundation.
They help ensure that you have thought things through, minimized your risks, and fully complied with federal, state, and local laws. Here's a step-by-step approach to help get your dream business up and running.
1. Do some research
To win customers and attract investment, you must explain what you do and what makes your business unique. You must understand the customers you want to attract.
The first step in this process is some simple research. Who are your competitors, and what are they offering? What kinds of customers are they trying to appeal to, and what makes them stand out? Who are your ideal customers, and what can you do that's different?
2. Write a business plan
A business plan shows what your business will do, how you will market, manage, and finance it, and what your cash flow will be. The research you've done will help you get started.
A business plan can help you see whether you have a viable business idea, and most lenders and investors require one. There are many resources and templates available for writing business plans, both online and at your local public library.
3. Talk to a business lawyer
A lawyer can help you decide if you should set up a corporation, a limited liability company, or some other structure. A lawyer can also explain other legal issues that may affect your business, including contracts you may need, intellectual property considerations, and employment issues.
A lawyer's advice can give you peace of mind, protect against risks, and minimize tax consequences.
4. Choose a name for your business
Legally, your business name must be different from the names of other businesses in your state. This means that, before deciding on a name, it's wise to search your state's business name database.
If you plan to use your business name as a brand, you may also want to search the federal trademark database and get legal advice on whether you will be able to register it as a trademark.
Your business name should be memorable from a marketing standpoint and reflect your business's personality and values.
5. Form your business by filing formation documents with the state
If you are forming a corporation, LLC, or other registered business entity, you must file organizational documents, and you should also have bylaws or other written agreement that shows how your business will be run. If you are not setting up a registered business entity, you may instead need to file a fictitious business name or "DBA" with your state or locality.
6. Get a tax ID number and business bank account
Unless you are a sole proprietor or one-owner LLC with no employees, you will need a federal tax ID number—the business version of a Social Security number. Once your business is officially formed, and you have a tax ID number, you can set up a business bank account and apply for a business credit card.
7. Get licenses and permits
Contact your city and county, obtain a third-party provider's services, find out what licenses and permits your business needs, and then take steps to secure them.
For example, if you sell items that are subject to sales tax, you will need a sales tax permit.
With the nuts and bolts of your business in place, you can begin taking concrete steps to put your plans into action, including choosing a location, getting funding, launching a website, and hiring your first employees. And, with the planning you've already done, you'll be poised for success.
Find out more about Starting a Business