Requirements to Start a Business
Starting a business is exciting — but also demanding. This guide addresses some of the most common startup steps to ensure your company is ready for success.
1. Refine your idea.
If you’re thinking about starting a business, you likely already have an idea of what you want to sell online, or at least the market you want to enter. Do a quick search for existing companies in your chosen industry. Learn what current brand leaders are doing and figure out how you can do it better. If you think your business can deliver something other companies don’t, or you’ve got a solid idea and are ready to create a business plan.
Define your “why.”
In the words of Simon Sinek, ‘always start with why,’”. It is good to know why you are launching your business. In this process, it may be wise to differentiate between [whether] the business serves a personal why or a marketplace why. When your why is focused on meeting a need in the marketplace, the scope of your business will always be larger than a business that is designed to serve a personal need.
Another option is to open a franchise of an established company. The concept, brand following and business model are already in place; all you need is a good location and the means to fund your operation.
2. Designate the proper business entity.
First things first. Choose the proper business entity or structure for your startup. This is crucial because it affects your personal liability, what you pay in taxes, and your fundraising ability. Possible structures include sole proprietorship, general and limited partnership, C-corporation, S-corporation, and limited liability company. Once you decide which structure is best for your company, you need to officially designate it through your secretary of state.
Most small businesses start out as sole proprietorships or partnerships because these require minimal paperwork and set up time. However, these types of businesses also don’t offer sufficient liability protection for business owners. A corporation or LLC is generally a better choice as your business grows, particularly if you’re planning to secure a business loan or raise venture capital.
3. Make sure you are paying proper business taxes.
Every business owner is legally required to pay taxes. This includes income tax, self-employment taxes, and for some businesses, sales tax. It’s wise to hire an accountant or tax advisor to make sure you are compliant with all tax laws. Accounting software can also help you figure when to file taxes and what forms you need to fill out.
Most small business owners can’t wait until March or April to pay taxes. The IRS has a pay-as-you-go tax schedule for businesses, requiring business owners to pay estimated taxes on a quarterly basis. Make sure you check the IRS requirements for your business type to avoid any fines and back taxes.
4. Set a vesting schedule for all founders and early employees.
This is a practical measure many startups often overlook when they’re just starting out and excited about getting off the ground. But this will protect your business down the line and ensure a certain level of commitment each founder or early employee brings to the table.
Creating a vesting schedule upon incorporation states that stock ownership will vest over time, preventing investors from selling all their stock whenever they please. Note that most investors require this measure before they’ll make any initial investments.
5. Business Certifications
The state business license office may also require your particular kind of business to be certified. For example, in the state of New York companies looking to asbestos abatement work, or companies from out of the state that want to do contracting jobs in New York, must be certified with the state, according to state certification resource website Contractors-License.org. Check with your state licensing office to see if your business requires any certifications before you can begin conducting business.