Starting a Buiness - Small Business

So you have this GREAT idea for a business, and want to know the proper steps to get started? Well, look no further, this guide will show you the steps you need to take (and some of the forms you will need to file) to start your own small business. The best thing about this, is that it is a very cheap endeavor to do, and allows you so many benefits including small business grants, and a lot of government assistance (financially and otherwise) on starting your business.

The first thing you need is an idea! If you have always wanted to work for yourself, do you know what you have wanted to do? Do you have a marketable skill? Do you make jewelry, build computers, or want to write a book? Well, this is the foundation of your business. You can have more than one service or skill that is offered for your business, but let's start with one.

• Sole Proprietorship: This is probably the most common business model for a small business.  All of your assets and the business assets are one in the same.  All losses are your responsibility, all gains are considered your taxable income.
  
• General Partnership: Two (or more) people who are willing to accept all responsibilities, and share all income.
  
• Limited Parnership: A 'General' Partner, and a number of limited partners.  This usually means that the limited partner will typically have less fiscal responsibility with less fiscal risk, while the general or primary partner bears the primary weight of the burden, but with the most revenue gaining opportunity.
  
• Limited Liability Company: (sometimes called a Limited Liability Corporation, but this is a misnomer).  This is, in my opinion, the best of both worlds.  It is not a corporation, which saves you from much of the bureaucracy of a corporation including a board, minute meetings, and more, but it does offer protection to the business owner in the case of loss.  You have flexibility in distributing profits, though there is more red tape when starting a limited liability company than a sole proprietorship.
  
• Corporation: A Corporation is a completely separate entity than an individual.  There are shareholders, and there are specific and separate rights, laws, and responsibilities that the holders of a corporation are liable to follow.
  
• S Corporation: This is similar to a Corporation instead of when it comes to taxes.  Income taxes, net gains and losses are held to the shareholder, and not to the corporation itself.  They are also limited to 100 shareholders, and shareholders must be individuals and not corporations themselves.

When you have determined this, you need to next consider if you will be Home-Based, have a storefront or office you rent, have an e-Commerce business, do business through eBay or online auction houses, own a Franchise, or any other option.

For the purposes of this Hub, we will focus on a Sole Proprietorship.

What's the plan, man?

This is the most difficult part of starting a business. You need to do some writing (and hopefully some research). The government's requirement for starting a business includes writing a business plan which will be helpful for you in staying focused.

A good outline for writing your business plan (modeled after the U.S. Small Business Administration's outline): This may sound like a lot of work, but it is necessary, and will help you stick to your plan. You can find several samples of Business plans for free at: This Site.

1. Cover sheet
2. Statement of purpose
3. Table of contents

I. The Business
A. Description of business
B. Marketing (how you will plan to advertise your busiess)
C. Competition (what will distinguish you from your competition)
D. Operating procedure  (standard procedures from disciplinary procedures to hiring/firing)
E. Personnel  (Your employee policies)
F. Business insurance (What sort of insurance you will have covering your business - checking with your home owner's insurance company or renter's insurance company.  If you are a sole proprietorships, some things may be covered)

II. Financial Data - This is information you should be keeping anyway.
A. Loan applications
B. Capital equipment and supply list
C. Balance sheet
D. Breakeven analysis
E. Pro-forma income projections (profit & loss statements)
F. Three-year summary
G. Detail by month, first year
H. Detail by quarters, second and third years
I. Assumptions upon which projections were based
J. Pro-forma cash flow

III. Supporting Documents - these are specific to certain types of businesses, but are typically very important.
A. Tax returns of principals for last three years Personal financial
statement (all banks have these forms)
B. For franchised businesses, a copy of franchise contract and all
supporting documents provided by the franchisor
C. Copy of proposed lease or purchase agreement for building space
D. Copy of licenses and other legal documents
E. Copy of resumes of all principals
F. Copies of letters of intent from suppliers, etc.

"Ok, I've written all of this stuff, and have some start up cash.  Now what?"

Well, if you weren't so impatient, you would have read about your next steps.  There is a nifty calculator to help you figure our your startup costs here.  Besides that, having something of a business plan, budget, and idea on when you will start breaking even is important, too.

You need to then pick a name.  This process is a lot more involved than one would think it is.  You need to make sure you're adding the right initials at the end of the company name, and you need to make sure that your business name isn't taken. You can either register your business' name at either the Secretary of State, or if you really want to keep your name to yourself, I would suggest getting it registered as a trademark through the U.S. Patent and Trademark office.  When you have your business name registered, you may want to think about getting a domain name and hosting for your website.  Our own darkside has written a Squidoo Lens about how to do this process.

You need to make sure that you meet all of the State and Federal laws for starting a business. Those you can find at the U.S. Small Business Administration. You will need to register for an Employer ID Number (also known as a Federal Tax Identification Number) which you can apply for online at irs.gov

These are all the forms that you would need to fill out in case you will be importing or exporting, if you will be dealing with hazardous materials, and anything out of the ordinary.  You may want to speak to a lawyer if you are in doubt, or do your own research on the IRS's website, and the USBA's website (linked earlier).