Entrepreneurship is the dream of many Americans. Most are driven by their desire to be their own boss, control their time, and earn more for their skills or talents. There has been quite a number who have already braved putting up their own small businesses. According to the report released by the U.S. Small Business Administration in October 2020, there are 31.7 million small businesses in the country.
While entrepreneurship is an appealing idea, starting a small business is no easy feat. It takes a lot of heart, determination, and knowledge of how to establish one. Once you have conducted market research and decided the type of business you’re ready to establish, it’s time to make your dream a reality.
There is no one-size-fits-all approach to starting a new small business. However, this guide will assist you in ironing out the crucial start-up details.
Quick Links: Steps to Start A Small Business 2022 Guide
Step 1: Write Your Business Plan
Step 2: Choose Your Business Structure
Step 3: Register Your Business and Secure Necessary Permits
Step 4: Open A Business Bank Account
Step 5: Get Financing For Your Business
Step 6: Apply For Business Insurance
Step 7: Get the Right Business Tools
Step 8: Decide On Compensation Package For Employees
Step 9: Decide On The Compensation Package For Yourself As The Owner
Step 10: Market Your Business
Final Thoughts
Step 1: Write Your Business Plan
Your business plan is essential as it outlines your business’s financial goals and explains how you intend to achieve them. A written roadmap defines your business strategy and long-term business objectives.
A good business plan provides well-thought-of answers to concerns that could get potential investors and clients interested in your business. It should include the following sections:
- Executive summary
This section contains a description of your business. It should include your company’s mission and vision and indicate how to achieve them.
- Company description
The company describes the relevance of your products or services.
- Market analysis
This section should include data on studies that prove that your company is in a great position to compete against rival companies.
- Organization and structure
Write about the type of business you expect, the risk management strategies you propose, and who will be on the management team and their credentials. Define whether your company would be a sole proprietorship, a limited liability company (LLC), or a corporation.
- Products or services
Describe your product, its production costs, production information, and how it compares to competitors’.
- Background summary
This section is a compilation and summary of any data, articles, and research studies on trends that may impact your business or industry, both positively and negatively.
- Marketing plan
The marketing plan defines the features of your product or service, summarizes the SWOT analysis, and examines competitors. It also discusses how you’ll promote your business and retain customers.
- Financial plan
A financial plan includes a proposed budget with projected financial statements for at least five years. This section is intended to persuade the reader that your business will be stable and profitable.
Composing a business plan that would help you secure loans or attract investors can be complex. Financial experts like CRI Payroll Services can assist you in making a great business plan that will help pave the way for your business.
Step 2: Choose Your Business Structure
The type of business structure you choose will impact your daily operations, personal liabilities, taxes, and filing requirements.
Here are several options for business structure:
- Sole proprietorship
A sole proprietorship is easy to form and gives the owner complete control over the company. In this structure, your business and personal assets and liabilities are not separate. Thus, you may be held personally liable for the obligations and debts of your business. Compared with other business structures, getting a bank loan for a sole proprietorship is harder.
- Partnership
Multiple owners form a partnership. Profits are divided among the company’s owners and reported on their tax returns. The most common kinds of partnerships are general, limited, and limited liability partnerships (LLPs).
- Limited liability company (LLC)
An LLC is a hybrid business structure that allows owners to take advantage of the benefits of both a partnership and a corporation. The best benefit of an LLC is that it protects owners from personal liabilities over the company’s liabilities and debts. However, members of an LLC are considered self-employed and obligated to pay self-employment tax contributions.
- Corporation
A corporation, like an LLC, limits the owners’ personal liability for business liabilities and debts. Two kinds of corporations differ primarily in how they are taxed. C corporations pay tax on their income, and incorporators pay tax on whatever income they receive as owners or team members. For S corporations, profits and losses are passed to the owner’s income without being subject to corporate tax rates.
Please note that this is a guideline. The requirements for each business structure may vary by state. It is wise to consult with an expert such as CRI Payroll Services to help you fully understand these business structures so you can select the best one for your business.
Step 3: Register Your Business and Secure Necessary Permits
The next step is to get your business registered. Your business’s location and structure will determine how you must report and register it. Here is the list of things you need to prepare:
- Choose your business name
Choose the best business name for your company. Ideally, it should be easy to remember. The business name you select cannot be the same as any existing business in your state, nor can you use a registered trademark.
- File business formation paperwork with state agencies
Filing with the state requires using a registered agent, such as CRI Payroll Services. The agent you choose will be authorized to accept legal documents on behalf of your company. Once the paperwork has been accepted, and your company has paid the filing fee, the state will send a certificate that can be used to apply for licenses, a tax identification number (TIN), and a business bank account.
- Register with federal agencies
Other than filing for a federal tax ID, most businesses do not need to register with the federal government to become a legal entity. The federal tax ID, more commonly known as an employer identification number (EIN), is acquired from the IRS.
- Apply for licenses and permits
The permits and licenses needed are determined by your industry and jurisdiction. Most businesses require a combination of local, state, and federal licenses to operate. Consult with your registered agent to know what documents you should secure and file.
Getting your business registered and knowing which permits and licenses you must acquire can sound overwhelming. Financial service companies, such as CRI Payroll Services, with extensive knowledge and understanding of the ins and outs of business registration, help new entrepreneurs set up their businesses more efficiently.
Step 4: Open A Business Bank Account
Once you have the paperwork ready, it is highly recommended for all businesses to open a business bank account. Do not let your personal finances mix with those of your company. Having a designated account for all business transactions makes it easier to manage your company’s finances.
Step 5: Get Financing For Your Business
There are several ways to fund your small business. Internal funding is when you use personal savings, credit cards, or funds loaned from friends or family. This type of funding can cause business owners to lose personal wealth or risk strained relationships with family.
External funding is another option for financing one’s company. Small business owners may combine different sources of capital. So funding may come from small business loans, business grants, angel investors, venture capital, and crowdfunding.
Regardless of the funding source, small businesses must make a financial assessment before taking out any loans. CRI Payroll Services can help you determine how much working capital you need, how long it will take you to repay a loan, and at the same time still make a worthwhile profit. CRI Payroll Services also offers Payroll Financing, which helps reduce stress on entrepreneurs and keep their employees happy.
Step 6: Apply For Business Insurance
Insurance is a must-have for all businesses, regardless of type and number of employees. It protects your company and its assets in the event of property damage, injuries, lawsuits, or other claims arising from your business operation.
CRI Payroll Services understands the importance of business insurance, which is why they offer the following Business Owner Policies and Insurance:
- Property coverage – protects your building and contents owned by the company.
- Liability protection – covers the company’s products or operations that may result in damage or injury to another.
- Business Interruption – this protects your company from fire or other accidents that may result in loss of income or operation.
- Other coverages – may include equipment breakdown, crime, liability, signage
- Workers Compensation Insurance – covers costs related to workers’ injuries in the workplace, medical expenses, and income replacement, if necessary
- Commercial Auto Insurance – insures your vehicles for physical damage and liability coverage for amounts, situations, and usage not covered by a personal auto policy
Step 7: Get the Right Business Tools
Technological advancement, if utilized correctly, definitely makes life and work easier. Finding the right tools for your small business helps you save precious time, automate tasks that could decrease your payroll expenses, and provide you with relevant and well-represented data to aid in better decision-making.
There is software for all areas of business operation, including accounting, customer relationship management (CRM), project management, and merchant services. Large corporations have the funds to create separate departments for each function. Investing in all these divisions and automating them can be quite costly for small businesses. Outsourcing to experts in different areas can be more cost-efficient.
Our company, CRI Payroll Services, offers financial services to address your company’s needs. Through our Full-Service Payroll package, we can take the entire burden of handling your payroll concerns. We can customize our services based on your requirements: Bookkeeping, Time & Attendance, and HR. We will ease your burden in these areas so you can concentrate your resources on more pressing business needs.
Step 8: Decide On Compensation Package For Employees
One of a company’s best assets is its employees. You have a lot to consider as a small business owner, from developing a pay scale for each position to sorting through insurance benefits. Luckily, companies such as CRI Payroll Services offer Human Resource Services to provide you with pertinent HR information, including industry-standard wages and competitive benefits.
We aim to assist your HR professionals in optimizing your workforce. Our dedicated team can handle some or all of your administrative duties on your behalf. We also offer strategic consulting services to help you identify critical issues and use actionable insights to drive business growth across human capital management (HCM), including compliance, talent strategy, change management, and communications.
Step 9: Decide On The Compensation Package For Yourself As The Owner
How much you should pay yourself as a business owner is determined by your company’s structure, its development stage, and other factors.
If your business is a sole proprietorship, partnership, or an LLC, you can typically take an owner’s draw to a maximum of your owner’s equity. For corporations or an LLC taxed as a corporation, you are legally required to take a salary comparable to what someone else doing the same job in your industry would be paid.
Some owners would not take a salary or make an owner’s draw in the early stages of their business. However, as soon as your business starts earning, you should start paying yourself. Your salary is considered a part of the company’s operating expenses. By not allocating funds for it, your books would not accurately show how well your company is doing.
A financial services expert such as CRI Payroll Services can enlighten you on matters concerning payroll and the tax implications of allocating salary for your services as a business owner.
Step 10: Market Your Business
Once you have considered all the pertinent start-up concerns, you could start your business operations with your business plan as a guide. Your initial launch and sales are only the beginning of your entrepreneurial journey. Consider outsourcing certain functions, such as Full Payroll Services, so you can concentrate your efforts on growing your business. This will be more cost-efficient in the long run.
Final Thoughts
Entrepreneurship can be one of the most rewarding accomplishments in life. The requirements for a new small business can be overwhelming, especially for new business owners. Worry not; CRI Payroll Services is ready to assist you in ensuring that you start your business correctly.
With a full range of HR and payroll-related products, tools, and proper support, CRI Payroll Services can help provide immediate and personalized service to help with many of your Human Resource needs.
Learn how CRI Payroll Services can help support your employees & your business.