If you are looking to start a business and become your own boss, congratulations! But while it’s nice to have an entrepreneurial spirit, you might not be sure of the things required to make your dream of business ownership a reality. In this article, we will explain five important things you need to launch a business.
1. A Well-Drafted Business Plan
You need to do a lot of planning to open a start-up. And a business plan puts it all together. Although a business plan is not a legal requirement to start a business, you will have to show a written plan to banks or other money lenders when trying to get a loan.
Also, a business plan can help ensure that you and any business partners (if you have one) agree on the company’s direction and the roles each party has to play.
A solid business needs to include the following:
- Your business description
- An executive summary (highlights of the main points
- A brief explanation of the management structure
- Your marketing plan
- Financial projections
- An outline of the funding requirements
- An appendix with extra information (not compulsory)
It normally takes time to create this document, and your business plan may need to be revised as you move ahead. Making a clear business plan early in the process can prevent you from future headaches, and you will be grateful to yourself that you put in the hard work.
2. Funding
You’ve probably heard this before, but you need money to make money. You are going to need operating capital for the things below to get your business up and running:
- Rent
- Equipment and supplies
- Marketing
- Unexpected expenses
A lot of small business owners seek out a business loan of some kind. To get started, you can reach out to your local banks to know the lending options available to you. Also, the Small Business Administration (SBA) offers business loans to SME owners through financial institutions that partner with them.
However, you need to note that loan requirements may differ, and SBA loans usually have strict eligibility criteria. You may be required to submit a business plan and reveal personal financial information before you get approved for a loan.
3. A Business Name & Management Structure
You will want to have your business name registered with the government before you start applying your company logo on products, uniforms, etc. This registration is referred to as your “Fictitious Business Name” (FBN) or your “Doing Business As” (DBA) name.
If you fail to register your start-up, your business will bear your legal, personal name, which can result in confusion when dealing with vendors, business partners, and money lenders.
You will then use your business name to register your business structures. Your business can be structured as one of the following:
- Sole proprietorship
- Partnership
- Limited Liability Company (LLC)
- C Corporation
- S Corporation
Be advised, though, that the business structure you select will have a significant impact on the daily operations of your establishment and your tax liability. Therefore, it is important to consult with a financial advisor if you are not sure which business structure is good for you.
4. An Employer Identification Number (EIN)
This requirement has to do with how you intend to pay taxes. You will have to sign up for an Employer Identification Number with the Internal Revenue Service (IRS) if you have to recruit employees or if your business is structured as a corporation or a partnership.
Wondering what an EIN means? Consider it to be the Social Security number (SSN) for your business. An EIN allows the IRA to identify your business and make it easier for you to pay taxes.
When you have an EIN, you won’t have to include your personal information, like the SSN, on business documents. That’s why it is good to have one, even if it’s not a requirement so that things can go more smoothly.
5. Federal & Local Licensing
Depending on the location and industry, a business may also be required to have certain licenses and permits to operate. For example, you will need federal licenses to start a business in sectors regulated by a federal agency, such as:
- Tobacco
- Fireworks
- Alcohol
- Firearms
- Certain types of agricultural supplies
Also, your state might have certain requirements that you will need to fulfill before starting a local business.
These licenses are essential for restaurant owners who want to sell alcohol to their customers. You will have to showcase your licenses in your business place at all times, as you may receive fines or other penalties if you fail to do so.
Consider Opening a Franchise
Note that these are only a few of the requirements to open a business. There are many other things you also need to take into account, including human resources requirements and business insurance based on your location, industry, and plans for the future.
Why don’t you consider opening a franchise business? A franchise gives you all the benefits of owning a business, but the research and guidance provided by the parent company make the initial set-up requirements a lot easier.
