Tips for starting a business
Learn the basics that can help make your dream of owning a business a reality.
Many Americans dream of owning their own businesses. In fact, the 2014 Working Adult survey conducted by Harris Poll and the University of Phoenix, revealed that nearly 2 in 5 working Americans who do not currently own their own business hope to do so in the future.
To launch a successful business, potential entrepreneurs need to educate themselves about the fundamentals, including developing sound business and marketing plans and securing financing options to maintain cash flow or seize new growth opportunities.
The Illinois Small Business Development Centers are a great resource for those who want to explore the possibilities of becoming a new business owner. The centers offer one-on-one business advice, assistance with the development of business plans and filing the paperwork to establish a tax identification number, as well as access to business educational opportunities and financing programs.
Launching a new business can be an exciting adventure, but the fundamentals must be in place to ensure success. Here are some tips to get you started:
1. Write a business plan. An essential road map for success, a business plan outlines how your company will grow revenues over the next three to five years. It should include information about what your business does, what makes it unique and how it is structured, an analysis of the market and your competition, an operating plan for getting your product to your customers and financial information such as projected income, expenses and cash flow as well as a balance sheet which summarizes your assets, liabilities and equity in the business.
2. Register a business name. If you choose to name your business as anything other than your personal name, you’ll need to register that name with your county clerk’s office or your state government. This process is known as registering your “doing business as” name. It protects both you and your potential customers. Customers know who’s behind the business, and registration also helps protect your brand in the state in which you register.
3. Register for state and local taxes. In addition to paying federal taxes, your business will need to pay state and local taxes, including income and employment taxes. Nearly every state levies a business or corporate income tax. Like federal taxes, your state tax requirement depends on the legal structure of your business — whether it’s set up as a sole proprietorship, partnership, corporation, S corporation or Limited Liability Company (LLC).
4. Obtain the appropriate business licenses and permits. Depending on the type of business you plan to launch, there are certain federal and state licenses and permits you’ll need to run your business legally. If your business is involved in activities that are supervised and regulated by a federal agency—such as selling alcohol, firearms, commercial fishing, etc.— then you may need to obtain a federal license or permit. If you are selling goods or services, you may need a sales tax license or permit. To help business owners navigate the process, the Small Business Administration offers links to state-specific license and permit information.
5. Understand employer responsibilities. As your business grows enough to hire your first employee, you need to ensure that you are compliant with federal and state regulations. The first step is obtaining an employer identification number (EIN) which is necessary when reporting information about your employees to state agencies. Setting up records to document withholding taxes is imperative since the IRS requires that you keep records of employment taxes for at least four years. Employers are also responsible for verifying eligibility for employment, registering employees with the state and obtaining workers’ compensation insurance.
Financing to grow your business
With a solid foundation in place, you may find that you need additional capital to take advantage of new business opportunities. Once a business has been established for at least two years, more financing options become available through traditional bank sources. In evaluating the creditworthiness of a business, banks are looking for companies that are stable or trending upward. A diverse client base – one that does not depend on just one or two customers – is another indicator of the viability of a young business.
With a thoughtful plan and a banking partner’s guidance, financing options can help to make an entrepreneur’s dreams of growing their business a reality.
For more information on starting a business, visit the U.S. Small Business Administration website.