Starting a Business: Taking the Right Steps

steps to start a businessFor years you’ve toyed with the idea of starting your own business. You love the idea of being your own boss and setting your own hours. You know that you’d be successful and you’re ready to put your plan into action. The only problem is you don’t know where to start. When it comes to starting a business, there are a number of steps that you have to take before you even open the doors.                       

Laying the Groundwork

Any successful businessperson will tell you that it is important to lay the groundwork before starting your business. This often comes in the form of drafting a business plan. A business plan is essentially a roadmap that helps you organize your strategies for the company and projects over the next few years according to the U.S. Small Business Administration (SBA). It is designed to outline the path that your company needs to follow in order to increase the revenue that your business takes in, which in turn increases your profits. While drafting a business plan may not seem like a worthwhile task, careful planning is essential to creating a successful company, advises director of the San Joaquin Delta College Small Business Development Center. Developing a comprehensive business plan is not a step to skip.

Determining Your Legal Structure

After you’ve completed your business plan, the next step is determining what legal structure you want to form. Your decision will be based on which income tax form you want to file, according to the Internal Revenue Service (IRS). Each legal structure has its own rules and regulations regarding how you and your business are taxed.

The simplest structure you can choose is Sole Proprietorship. With this structure, all profits that are made are reported on your individual tax return. A partnership works in a similar fashion, except the income or losses that the company makes pass through to the partners who then must report these on their personal taxes. If you choose to start a C-corporation, you will be faced with what is known as “double taxation.” This means that both the corporation and the shareholder dividends are taxed. To avoid this, you can choose to start an S-corporation. The profits and losses that are reported by the S-corporation are reported to the IRS, and the shareholders of the S-corporation report any flow-through income on their taxes, but it is at their individual income rate. If you choose to form a Limited Liability Company, you will want to check with your state government because each has different regulations.

Choosing Your Business Name

Your business name is probably the most important part of your endeavor. It is what sets you apart from your competition, and it is how your customers remember you. Your business name was probably the first thing you decided on when you began the process of starting your own company. As important as your business name is, it is equally important that you get it registered. By registering your business name, you can ensure that someone else doesn’t use the same name and confuse your customers, advise the writers at the Wall Street Journal.

Registering your business name doesn’t have to be something that takes a lot of time. With LegalZoom, how to register a business name can be the simplest part of starting your business. With easy forms and dedicated professionals, the company can have your business name registered in a matter of days. They will even do a search of the federal trademark database to check for any conflicts of use. Don’t spend a lot of time registering your business name, let LegalZoom help you out so you can get on with getting your doors open.

Getting a Tax ID Number

Not every business is going to need a tax ID number. If you are a sole proprietor, you can use your Social Security Number when it comes time to pay taxes. If you have set up a partnership or a corporation, you will need to apply for a tax ID number through the Federal government. Your tax ID number is what the Federal government uses to administer the appropriate tax laws for your business. At this time you will also want to register with your state and local governments and acquire a state tax ID number. You will also need to obtain workers’ compensation, unemployment, and disability insurance before you can open for business.

Business Licenses and Permits

The final legal step that you need to take is to obtain any licenses and permits that your state and local governments may require. There are also Federal permits that you may need to obtain if you’re starting a business that will be selling alcohol, firearms, or a number of other operations that can be found on the SBA website. Once you fill out the paperwork and file it with the appropriate agencies, you will be ready to open for business.

Starting a business can be an exciting adventure, replete with opportunities to learn business lessons.  This is especially the case when you know what steps must be taken. Taking your time and ensuring that the legal paperwork is completely and properly filled out can save you from headaches down the road. While it seems like a lot of upfront work, it is work that is well worth it when your business becomes successful and your profits start to rise.


  1. says

    When my husband started his business many years ago, there were decisions that we needed to make as you mention. We didn’t exactly know what we were doing, but we learned as we went along. We ended up applying and getting a tax ID number, but then eventually moved to just our own social security number. It was simpler when it came to tax time. Another thing to think about is that once the business is established, it’s really important to keep thinking about how you’ll expand the business and keep up with current demands. It’s not a “set it and forget it” kind of decision.

  2. says

    I started my own business a few years ago. The set up process wasn’t that difficult (I started an LLC). But when I closed shop, I did get confused about who I had to notify about the dissolution of the company. I ended up making a few phone calls and figured everything out. It was a great learning process.

  3. says

    I’m glad you mentioned business plans. Business plans may seem like an unnecessary step, but they are actually really important. As a former SBA loan underwriter, I can tell you they were requited on many loan types. The loan applicants with more detailed, thorough business plans stood a greater chance of approval than those who slapped together a few sentences on a couple pieces of paper.

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