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How to Set Up Your Business

Many people operate a small business out of their home or operate as a self-employed individual and never take the opportunity to establish themselves as a formal business entity. While this is not an issue with smaller or part-time enterprises, entrepreneurs who want to expand their burgeoning business or self-employed individuals who want to realize the benefits and protections of expanding into a partnership or a limited liability company should take the step toward creating a formal business entity.

Determine the Right Structure for Your Individual Needs

The first step is to determine the structure of the business. A sole proprietorship will benefit a single person operating a small enterprise whereas an LLC might be more beneficial to someone who wants the utmost protection and isolation of their personal assets from their business. Partnership agreements are ideal for a small team of individuals who want to coordinate their efforts without having to deal with all the red tape associated with forming a corporation. Consulting with a tax professional can help determine which structure is most appropriate for the business model chosen.

Settle on a Name and How Much Operating Space You Will Need

If the business does not have a formal name, the next step is filing the proper fictitious name statement or registering a business name. Make sure the name is not already in use and find something that has a domain name available for a website as well. After selecting a name, determine whether or not separate commercial space is required to operate the business or if that is something that can be expanded into as the business grows.

Renting an inexpensive warehouse to produce a product might be more practical and efficient than cluttering up a garage and limiting productivity. However, a small partnership can easily operate out of a home office indefinitely and might never need room to expand. Matching the space to the requirements of the business is a vital step toward setting up the company properly.

Permits, Insurance, Bookkeeping, Marketing, Etc.

After determining the structure, the name, and the commercial space requirements of the business, there are a few less complex aspects that must be considered prior to opening the doors.

  • Determine whether any licensing or permits are required to operate.
  • Determine whether or not business insurance is an appropriate purchase at this stage and find an uncomplicated bookkeeping system that will work until the business outgrows it.
  • Planning a marketing campaign and developing a website are important considerations to giving the company a head start.
  • Finally, make sure to structure product or service pricing to be as competitive as possible in order to attract customers as quickly as possible.