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9 Steps To Start a Small Business

Our guide provides step-by-step instructions on everything from writing a business plan to obtaining funding.

America thrives on entrepreneurs. Just about anyone can start a business with little to no start-up capital.

If possible find something you’re passionate about or at least slightly interest in due to the long-hours, hard work and dedication it often takes to get a new business up and running.  

What Do You Need to Start a Business?

Step One – Research the businesses that interest you

Start with something you’re passionate about or at least interested in. Conducting market research can help determine whether your idea has the potential to become a successful business. By gathering information on potential customers and existing businesses, you can identify opportunities to gain a competitive advantage. The possibilities are virtually endless. Check out business ideas for start-ups under $500.00.

Step Two – Prepare a business plan

Writing a business plan can be a daunting task. If you are planning to apply for a small business loan, having a business plan is helpful. Business plans may seem obsolete but it’s still a good choice to have one. It serves as the foundation of your business, providing a roadmap for organizing, operating, and expanding your new enterprise. This document is a powerful tool that can persuade others to work with you or invest in your company. A well-crafted business plan demonstrates that you have a solid plan for success.

Step Three – Choose a business structure

Determine how you will structure your business, whether its a a sole proprietorship, partnership, corporation or LLC, your business structure determines personal liability, taxes and if you must register your business. Each type of structure has different rules and liabilities.

The simplest structure is a sole proprietorship and if you have no employees there is no need to become a corporation right away. It’s easy to upgrade your business to a corporation down the road. However, if you have employees or plan to sell a product that may trigger a lawsuit, you might want to consider incorporating sooner than later.

Step Four – Pick your business location

Choosing the right business location is a critical decision that can have a significant impact on your company’s taxes, legal obligations, and revenue, whether you’re establishing a physical store or launching an online shop.

Step Five – Get an EIN Number

Apply for an EIN (Employee Identification Number). You may obtain an EIN from the IRS online. An EIN is a crucial identifier for a business, helping it to meet legal requirements, obtain financing, and operate smoothly. Businesses need an EIN (Employer Identification Number) for several reasons, including:

  • Tax purposes. EIN is used by the IRS to identify businesses for tax purposes. Businesses are required to have an EIN if they have employees, operate as a partnership or corporation, or file tax returns for excise tax or employment tax.
  • Opening a business bank account. Most banks require businesses to have an EIN to open a business bank account.
  • Business licenses and permits. Businesses may need an EIN to obtain the necessary licenses and permits to operate legally.
  • Establishing business credit. Building a credit profile for a business is important to secure financing and other business services. An EIN is required to establish business credit.

Step Six – Register your business name

When starting a new business always register your business name, even if it’s a home-based business. If you decide to incorporate, your business name will be registered in accordance with your State’s incorporating requirements.

If you structure your business as a sole proprietor register your business in the appropriate county or province.

Registering your business is a very important initial step in starting a business. It not only allows you to see if someone else has registered a business in that name, but also enables you to open a business checking account.

Step Seven – Apply for licenses and permits

To establish your business as a separate legal entity, registration and permits may be necessary. The specific process and location of registration are dependent on both your business structure and location. The Small Business Administration website can tell you if you need federal and state business licenses along with permits.

Step Eight – Open a Business Checking Account

It’s best to have a separate business checking account for all business transactions for several reasons:

  • First, a clear separation between personal and business finances makes accounting and tax reporting easier and more accurate.
  • Second, it enables businesses to accept payments and pay bills using checks or electronic transfers in the business’s name, which is more professional and credible than using a personal account.
  • Third, it can provide access to additional banking services specifically designed for businesses, such as merchant services, business loans, and lines of credit.

Step Nine – Fund your business

The first thing you’ll need to do is determine how much funding you’ll need. The next step is to determine how to get the funding. Here are several options:

Personal savings. Using your personal savings to bootstrap your business lets you leverage your own financial resources to support your business.

Personal loan. Personal loans can be easier to obtain than business loans since lenders usually only consider your personal credit score. However, they tend to have lower borrowing limits and higher interest rates unless you find a low-interest rate loan.

401(k) loan. If your 401(k) plan allows loans, you can borrow money from yourself without undergoing a credit check. Consult your plan’s administrator to fully understand the fees or penalties. The last thing you want to do is damage your ability to retire on time.

Home equity loan or HELOC. These options offer some of the lowest interest rates since your home secures the loan. However, you may face significant closing costs, and there is a risk of losing your home if you cannot repay the loan or line of credit.

SBA-guaranteed loans. Banks may perceive a start-up as too risky for a loan but the U.S. Small Business Administration (SBA) can provide loan guarantees, making the bank less susceptible to risk and more likely to provide your business with the necessary financing.

Venture capital. Venture capital investments are a viable option for obtaining funding to start your business. Typically, investors provide venture capital in exchange for an ownership stake and involvement in the company’s operations.

Micro-loans. Micro-loans are business loans designed for startups.

Business credit. Start building business credit without using your personal credit as a guarantee.

Business loan for bad credit. When personal credit is required but needs improvement a bad credit business loans may be the only option.

Online business loan marketplace. Fundera is an online loan marketplace that helps small businesses find and compare loan options from various lenders.

Merchant cash advance. A merchant cash advance can help a business raise capital immediately but typically have higher interest rates.

Crowdfunding. Crowdfunding can be a low-risk way to raise funds for your business because contributors donate money rather than investing or lending. However, donors usually expect some form of benefit in return for their contribution. This may include receiving your product or service, formal recognition, or another type of reward if your business is successful. Kickstarter, Indiegogo and GoFundMe are popular crowdfunding platforms.

Business grants. Small business grants are often provided by federal, state, or local governments, corporations, or foundations. One major advantage of grants is that they don’t have to be repaid. However, competition for small business startup grants can be fierce, and it’s possible to spend a significant amount of time applying for grants with little or no funding ultimately received. Start your search here:

Several funding options exist but finding the right one will take some research and preparation to get your small business loan approved.

More Small Business Resources

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Disclaimer: A OneUnited Checking Account is required to apply.

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