Steps to Starting a Small Business

Develop a Business Plan

A business plan not only helps you organize your thoughts, but also provides direction. It is also a valuable tool to have in hand if you plan to seek financial backing for your new enterprise. A written business plan helps to develop strategies, financial projections and the specifics of a marketing plan for both advertising and promotion.

Business Financing

Once you've completed your business plan its time to find the capital to back your business. However, as you consider your options realize that there are pros and cons to borrowing money, no matter the source. For small businesses financing can come through:

• Bank loan – Loan payments can burden your business while it's young
• Investors – Most often investors expect to own a portion of the business
• Friends/family – May cause problems within the family or between friends for various reasons

Choosing a Legal Structure

Once you have your business plan and financing you may think you're ready to open your doors, but before you do it's important to choose a legal structure for your business. This may be influenced by the financing option you choose.

• Corporation - Basically a corporation is a business entity provided with many legal rights identical to those of an individual. A corporation can be comprised of one person or a group of people and grants limited protection to those involved in the business. This liability limitation is one of the reasons business owners find incorporating an attractive option.
• Limited Liability Company - A limited liability company has many similarities in structure to a corporation. The main difference is that the owners' liability is limited. In the U.S., limited liability companies are often called an LLC.
• Partnership - A partnership has more than one owner. For this business structure, both profits and liability are shared by the owners.
• Sole Proprietorship - A one-person business that is not registered with the state as a corporation or a limited liability company.
• Close Corporation – An agreement is made ahead of time for surviving stockholders to buy outstanding shares belonging to shareholders who die. This agreement outlines the procedure to follow in order to buy the shares, including a formula to be used to determine how many shares may be acquired by each surviving shareholder.

Once you've established what legal structure you will use, it's time to file with the state to incorporate and receive your federal identification number.

Deciding on Location

Make a checklist to help determine the best location for your business. The most obvious criteria will include things like zoning appropriateness, parking availability, and how much it will cost you in taxes. The following links will aid in constructing a checklist to help you find the best location for your business:

• Choosing a Business Location Checklist
• Choosing a Business Location
• Choosing a Location for Your Business

Steps to Starting a Small Business Follow a Natural Path

These steps to starting a small business are not complicated, and actually follow a natural path to reaching your goal. However, it's helpful to keep a list of things to be accomplished because it is easy to get caught up in the excitement or bogged down in the process. Creating your business plan as a first step will offer further direction to help you stay focused on what really needs to be done before you open the doors to your new business.