STARTING BUSINESS INFORMATION
(A Guide to Starting a Business of Your Own)
Starting a business takes motivation, desire and talent. It also takes
research and advance planning!
When starting a business, it is crucial to
get the right information. Starting a business entails
choosing the right business entity, since it determines liability exposure,
taxes, financing, management, as well as the rights and degree of participation
of each business associate in the venture. Starting a business means
having many important decisions to make and many rules and procedures that must
be addressed. While there is no single source for all filing requirements, here
are steps to assist you in starting a business of your own.
General strategy for starting a business
Like a chess game, success in starting a business (usually small
businesses) starts with decisive and correct opening moves. And, although initial
mistakes are not fatal, it takes skill, discipline and hard work to regain the
advantage.
To increase your chance for success, take the time up front to explore and
evaluate your business and personal goals. Then use this information to build a
comprehensive and wellthoughtout business plan that will help you reach these
goals.
The process of developing a business plan will help you think through some
important issues that you may not have considered yet. Your plan will become a
valuable tool as you set out to raise money for your business. It should also
provide milestones to gauge your success.
Business startup -Things to consider before starting a business
Before starting a business, list your reasons why you want to start a
business. Some of the most common reasons for starting a business are:
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You want to be your own boss.
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You want financial independence.
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You want creative freedom.
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You want to fully use your skills and knowledge.
Important questions to ask when starting a business:
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What do I like to do with my time?
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What technical skills have I learned or developed?
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What do others say I am good at?
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How much time do I have to run a successful business?
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Do I have any hobbies or interests that are marketable?
Starting a business entails identifying the niche (need/demand/market) your business will fill.
Conduct the
necessary research to answer these questions:
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Is my idea practical and will it fill a need?
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What is my competition?
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What is my business advantage over existing firms?
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Can I deliver a better quality service?
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Can I create a demand for your business?
The final step before starting a business is to accomplish this pre-business checklist.
You
should carefully answer these questions:
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What business am I interested in starting?
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What services or products will I sell? Where will I be located?
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What skills and experience do I bring to the business?
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What will be my legal structure? (see overview below)
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What will I name my business?
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What equipment or supplies will I need?
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What insurance coverage will be needed?
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What financing will I need?
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What are my resources?
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How will I compensate myself?
Your answers will help you create focused, well-researched business plan that
should serve as a blueprint. It should detail how the business will be operated,
managed and capitalized.
Here's a
list of business entities to choose from when
starting a business
When starting a business do you expect profit or losses?
As an entrepreneur who is just starting a business, it is important to
project and determine whether you expect your small business to initially
generate profit or losses.
If your business expects to lose money initially, a flow-through entity like a partnership, LLC or S corporation is preferable because it will allow owners to deduct the losses from their taxable income.
Starting a Biotechnology business, for example, often operate at a loss in the beginning because product development costs are high and they must usually wait for FDA approval before selling a product. It will take years
after starting a business before any profit can be realized and carry forward business losses.
When starting a business, know whether the business you're starting will need to register as a foreign corporation, partnership, or Limited
Liability Company before
your business starts operating in other states. Some states will impose heavy
penalties for failure to register properly.
Starting a business includes paying state income taxes to states in which
they operate, and to withhold payroll taxes, workers' compensation insurance,
and other taxes if it has employees in other states. When starting a business
you may also need to pay property taxes if the business you are starting owns
real or personal property in other states.
State laws require licenses for a wide variety of businesses and professions.
Cities, counties and other local agencies may require local licenses as well. A
business may want to consider local licensing requirements before deciding where
to locate, as these requirements vary widely among local governments.
Starting a business
and insurance coverage
Starting a business includes getting insurance coverage for all anticipated contingencies to protect
you from personal liability and to protect the assets and earnings of your
business itself. Coverage should include general liability insurance, products
liability insurance, errors and omissions insurance for directors and officers,
fire and casualty insurance, business interruption insurance, life
and disability insurance for key personnel, insurance to fund the share
purchases if a shareholder dies or becomes disabled, and workers' compensation
insurance.
Starting a business
and choice of business name
An entrepreneur, when starting a business, should check prospective names of a new business entity with the
Secretary of State to make sure they are available before filing any documents. This will avoid a name conflict and rejection of the documents.
Most Secretaries of State will maintain lists of the following:
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names of all corporations, LLC's and limited partnerships organized under the laws of that state in good standing;
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names of all foreign corporations, LLC's and limited partnerships qualified to do business in the state and in good standing; and
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reserved names. Secretaries of State will not accept charter documents with names that closely resemble, are confusingly similar to, or are the same as any name on one of these lists.
Starting a business includes considering whether the proposed business name is available for use in other states where it will conduct business. State laws will allow a foreign corporation to use an assumed name if its name is not available in the state.
Most entrepreneurs who are just starting a business fail to check
beforehand whether the business name is available. If a business name is not available in a state, it may still be possible to use the name by getting the consent of the entity already using the name.
There is a difference between filing a name with a Secretary of State and using a name or trademark for identifying goods or services. When a Secretary of State approves a name for a business
you are starting, it merely means that the entity has complied with state law prohibiting the use of a business name closely resembling the name of another business organized and qualified to do business in that state.
The failure of the secretary of
state to object to the use of a business name does not mean that other business
entities won't be able to prevent its use if they hold a trademark in that name.
Thus, an entrepreneur should conduct a search of existing names to determine if
a prospective name violates the trademark of another entity.
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