When you're ready to start a business, you need to take the proper steps to turn your dreams into a reality. From deciding whether the business can be profitable to checking off your legal to-dos, follow these steps to make sure your business can get off the ground without a hitch.
Steps to Starting a Business
Before we get started with a legal checklist, you should first make sure that your business makes sense. The first steps to starting a business include having a business plan and analyzing its feasibility or commercial viability, because every business exists to make a profit.
Does the business suit you? If it doesn’t, you are better off staying away, no matter how great it may be. For instance, if you’re not really a people person (and that’s totally fine), think twice before pursuing a business in face-to-face sales. We all have talents, and we should use them to our advantage.
Have a business plan in place. This mentions the objective(s) of the business, how it is to be up and running. Although not very detailed, it serves as the document to fall back on whenever there is any doubt as to the next step to be taken.
Can the business make money? This is the most important point on the list. There will obviously have to be an investment. At what point in time can the business ‘break even’ and make profits? When can it generate enough profits to pay off the original investment(s) made, even partly, and still cover the day-to-day expenses? All these should be outlined in a cash flow analysis statement, which is part of the business plan. The business plan should also have a profit/loss forecast.
Locate sources of funding. There are many ways to get funding. There is the Small Business Administration, as well as banks and lenders that can provide loan options for once your business is off the ground. You could also think about pouring in your personal funds into the business. A mixture of both could also prove to be the right combination for your business. You could also think about selling equity, or shares in your company, for cash.
This ‘starting a business checklist’ can prove to be immensely helpful when contemplating your own small business – in fact, you could even decide against pursuing it further, and this could prevent you from losing thousands of dollars.
But if you do decide to go ahead, there are certain legal requirements for starting a business.
Determining the number of owners your business will have. This could be just one (yourself), two (perhaps a spouse or business partner), three or more. The reason why this is important is because your own share of the business (and its profits) depends on the number of owners. If there are three owners, you could expect to receive only a third of the profits; if you plan to go public and have 10,000 owners, your own share of the profits would depend on how many shares you hold in the company. If you hold less than 50%, you might not have controlling stock in the company, so it may not go in the direction you wanted.
All these could potentially result in you having to go back to the drawing board and re-evaluating your business proposal.
Liability. The good news with not being the sole owner is, your liability is also reduced. This might be useful if your business is a high-risk one, such as trading in commodities where the prices could change in an instant and cause you heavy losses.
Choosing a name for your business and registering your company officially. Some choose to register their businesses as Limited Liability Companies or LLCs – these are officially ‘partnerships,’ but the partners are exempt from being personally liable for the losses. If the company goes bankrupt, it is to be dissolved. A corporation can continue to work even if it files for bankruptcy. For example, Lehman Brothers filed for Chapter 11 bankruptcy protection of its assets, and Nomura Holdings was able to purchase its investment banking operations in the Asia-Pacific Region, Europe and the Middle East. This gave a degree of respite to its owners.
When deciding on a business name, it is no good if it is already in use by another company. This can easily be ascertained. Let’s say you want to register ‘Rocky Mountain Trailers’ in Florida. If a company by the same name exists in Montana, you may or may not be able to do depending on whether they have obtained a nationwide trademark for the same. If they haven’t, you have two choices – you could go ahead, but what if both of you decide to expand your businesses to the same state later, which would result in confusion among customers?
Ideally, it should be unique. If your business plan involves expanding to other states, it is worthwhile to get a federal trademark. You could also book your domain name before others get to it – legally, they cannot be accused of cybersquatting if they registered the domain you wanted in their own name(s) before you registered your company.
Your business could also be a partnership. In this case, it should specify who the partners are, and whether all partners hold an equal share in the business. It is also possible to incorporate a company where some of the partners have a greater share than others. The Articles of Incorporation could also specify what is to be done in case one of the partners wants an ‘out’ – he could sell his share back, and which of the other partners has the first right to buy it.
Only if you legally register your company will you be eligible to start a bank account in the company’s name, which will help you make and receive payments.
Taxation. Depending on how the company is registered, the profits will also be taxed accordingly. So it is in your best interests to read up more about this or seek the assistance of an experienced professional.
Use these tips to make your business goals a reality!