Create a Business Plan

The first step to starting a business is creating a logical, structured plan for business goals. The business planning process lays out, on paper, a specific set of goals for the business and can cover the reasoning behind the goals and the planned methods on reaching the goals listed. The business planning process may also include providing background information on the business, or team within the business, that will be using the methods outlined to reach the goals listed.

Choose a Business Structure

There are several different business organizational structure choices that can be made when opening a new business or restructuring an existing business. One type of business structure is the LLC, or Limited Liability Company. As the name implies, both liability and tax implications for the owners, also called members or managers, is limited compared to a regular corporation or sole proprietorship situation.

Sole Proprietorships place the entire responsibility of both tax and liability on the listed owner of the company. There is no protection for the owner if the company is sued; the owner can be held financially responsible for the entire debt of the business, regardless of the type of debt.

Partnerships are reserved for businesses owned by two or more people, with unlimited liability for each of the partners regarding any debts incurred by the business. This means each partner is equally liable for the debts of the business and there is no – unless it is specifically a limited liability partnership – protection for the owners personal property.

A C-corp and S-corp structures for a business separate the business from the owners and provides limited liability protection for the owners’ personal property. The debts of the business belong only to the business and the owners are generally only liable if they use business funds for personal purchases.

Co-ops are a different type of business structure that is owned by employees, producers or customers and operates in a democratically controlled design making environment. Co-ops normally shares profits among its members through paying out dividends throughout the year.

Raise Capital

Loans are an often used method for acquiring operating capital for a business. A financing institution can decide, based on the time in business, existing operating capital and any existing business plans, whether to provide the business with a secured, unsecured or subsidized loan for the business.

Venture capital is usually funding granted to high-risk startup companies and can carry potentially high interest charges. For young companies with owners who are not already wealthy, venture capital is often the only type of funding they can acquire.

Grants can be applied for and awarded to several different types of businesses. Often, minority owned companies, sole proprietorships and small partnerships are awarded federal grants for capital funding. Grants do not have to be paid back to the person or entity that provides the money and usually require a working business outline or plan to be included with the application.

Choose a Location

Choosing a business location is going to depend on the products or services sold by the business and the zoning in the area in which the business operates. Depending on the type of business, it can be run from home, from a rented or purchased space or entirely in cyberspace. Many retail sales establishments operate both a physical location and an extensive internet presence for sales.

Know Your Taxes or Hire Someone That Does

Basic tax risks and rewards will depend on the structure of the business and the location in which the business operates. Sole proprietorship owners must disclose all of their income on their personal tax returns and often pay hefty self-employment taxes during the year. Corporations, limited partnerships and LLC structured businesses neither pay taxes at the end of the year nor do they receive a refund. The profit or loss incurred by the business is always distributed to the owners’ personal income tax through a specific schedule form included with a corporate tax return. If you don’t understand the tax laws in your area it would be beneficial to hire an accountant or speak to someone who knows the tax laws that help you get your business started on the right path.