“What business name should I choose?
Do I need to register my business with the state?
Which type of entity should I choose?”
In order to start your business the right way, it’s important to find answers to these questions. That’s exactly what we’ll discuss in this article: the critical steps to start a business so that you can move on to focusing your time and energy on earning cashflow with your products and services.
Let’s get started!
Step 1: Business Name
The first step in how to start a small business is choosing a name.
But not just any name.
You want a name that is:
When determining your business name, you’ll want to focus on three main criteria:
Because you want potential customers to remember your business name, your business name should be easy to read and pronounce.
Clear Business Focus
Your business name can be clever, but it must clearly indicate the business you’re in. This can include adding industry descriptions to your business name, such as “Law” or “Accounting” or "Creative Services".
You don’t want potential customers wondering what your business actually does.
Under Four Words
Keep your business name short.
Deciding how to start your own business with the right name can be tricky since you can’t register a name that’s already taken. Come up with a few of your top names as well as their synonyms, and then check them against the business listings on your Secretary of State’s website to see what’s available.
Step 2: URL Availability
The next steps to starting a business involves URL availability.
A website will be the main source of generating revenue, gathering leads, and marketing for your business.
- Establishes credibility
- Makes a good first impression
- Can reach a huge audience
Choosing a URL that’s as close to your business name as possible is necessary. You can check name availability through GoDaddy.com.
Keep in mind the following:
- Go with a .com extension
- Avoid dashes and numbers
- Again, ensure the URL describes what you do
Step 3: Apply For Entity
Why do you need an entity?
Simply put, entities offer limited liability.
Limited liability means that if your business is sued, only business assets (such as the funds in your business bank account) can be taken; not personal assets. Keep in mind that limited liability doesn’t protect you if you break the law or intentionally defraud people.
Limited liability has another advantage: Investors won’t fund businesses if it can make them personally liable for a company they aren’t managing.
So, if you expect to need business funding, it’s critical to have an entity.
It’s essential when researching how to start your own business that you understand the types of businesses you can choose from.
The types of entities are:
- Sole Proprietorship: this is the default entity of anyone working not as an employee
- Partnership: a business between two people, with a partnership there’s no limited liability
- Limited Liability Company (LLC)
- Corporations (C-Corp and S-Corp)
Next, we’ll look at common business structures.
LLC (Limited Liability Corporation)
LLCs limit your personal liability from the legal or financial impacts of your business, and establishing this protection is one of the crucial steps to starting a business.
Keep in mind that the owners of LLCs only pay taxes once, and that's when the company gives profits — the LLC doesn’t pay taxes itself.
This makes LLCs an easy and popular choice when deciding how to start a small business.
An S corporation isn't a business entity like an LLC is; an S corp is an elected tax status.
For tax purposes, you’re both considered an employee and an owner, and as money is brought into the business, you pay yourself a reasonable salary.
S-corps are also limited to 100 shareholders.
C Corps are treated like individuals, meaning they file a tax return in addition to their employees returns.
C Corps incur “double taxation” since your business pays payroll taxes and you pay individual income taxes.
When thinking about how to start your own business, keep this in mind.
With C Corps, there are no shareholders limit, and the company can continue if the owner leaves the company.
Step 4: Register Your Business
After you choose a business structure, you must register your business with the state or through Legal Zoom.
Also, if you have employees or are registered as a corporation or partnership, you will need an employer identification number to operate.
If you’re still deciding how to start a small business you can use your SSN instead, but you may want to get an EIN regardless.
Business registrations are public record and anyone can see your info — and your EIN — making this one of the important steps to starting a business.
You can apply for an EIN license using IRS.gov.
Additional Tips On How to Start a Small Business
Aside from this 4-step process, here are a few additional tips to starting your own business.
When learning how to start your own business, it’s critical that you stay on top of all legal and state communication.
If you fall behind, you risk fines or your business being dissolved for non-compliance.
Ensure that you keep a record of all your legal business communication.
It’s important to understand the tax implications of your business, as well as understanding that tax implications may change over time.
Just like with all legal communication, ensure that you keep all records of tax-related information.
The Bottom Line: Steps to Starting a Business
When starting a business, and even running your business, the best way to minimize your risk and maximize your profitability is education.
If you want to learn more about your business, here are a few additional resources: