10 Steps to Launching Your Business in 2020
You have made up your mind and you’re ready to start your entrepreneur journey, congratulations! With the effects of COVID-19 many have realized that is it imperative to have multiple streams of income. A business isn’t easy, but with the right mindset, preparation and plan you can be successful. So, before you pay for your first social media ad — follow these steps below to build a solid business foundation.
1. Assess the validity of your Business idea
It is best to think through your idea and assess your business model in the early stage. The Business Model Canvas is a great tool to use. Completing this step will allow you to identify your customer segments, define your value proposition, revenue streams and cost structure.
2. Write your Traditional or Lean Business plan
Business Plans are a major artifact needed to secure funding for your business. It is also a very helpful tool that allows you to view your company holistically and reference as a road map. Writing and working through each section of a business plan will give you much needed insight. And for those who are better served as a Lean Start-Up, working through the Business Strategy Canvas satisfies this need as well.
3 reasons you need a Business Plan.
1) To Gain a deep understanding of your market and financial projections.
2) To hold yourself accountable, stay organized and remain on track.
3) To secure debt and equity funding for your business.
3. Plan Your Finances
Estimate startup cost and established a budget. Using your business model as a reference, identify all the cost associated with running your business. By identifying your startup cost and expenses you can create your budget, financial documents and begin forecasting and managing your cash-flow. Know how you will fund your business, will you seek investors, small business loans, utilize credit or crowed funding?
4. Choose a Business Structure.
The structure you choose for your business will dictate how much taxes you pay, level of personal asset protection, liability exposure and company ownership. The chart below outlines the different Business structures and attributes.
Image captured from SBA.com
5. Pick Your Business Name and Domain Name.
Naming your Business is one of the most important things you will do. Names have great marketing and legal impacts. Depending on your business you will need to choose a variety of names: Doing Business As (DBA)name, Business Entity name, Product Line name(s) and Domain name(s).
To confirm your business name(s) and domains are available you can do quick online search and visit the sites below.
6. Register your business.
To protect your business name from being used by another business and to establish the formation of your business entity you must register with the state. If you are a Sole Proprietorship you should only file a DBA. To protect your business at a federal level and outside of your state you should register a trademark.
7. Get federal and State Tax IDs (EIN, TIN).
A Federal Taxpayer Identification Number (TIN) is a generic term used for tax and identification purposes.
Different TINs include:
Social Security Number (SSN) - Used by Solo Proprietorship when filing taxes
Employer Identification Number (EIN). - Used by LLCs and Corps when filing taxes.
Individual Taxpayer ID Number (ITIN), - Used by Non-resident alien when filling taxes
EIN are needed to open a business bank account, hire employees, apply for business loans, and pay federal payroll taxes. It's free to apply for an EIN, and you should do it right after you register your business. Visit the IRS site to apply for an Employer Identification Number (EIN).
In some cases a State TIN is needed for state identification purposes. Those include sales taxes, state licenses and local permits.
8. Apply for licenses and permits
Needed licenses and permits vary by state and industry. Review this checklist covering the different federal, state, and local licenses and permits you may need to obtain prior to opening for business.
9. Open a Business Bank Account and Get Business Insurance
You must separate your personal and business finances. A separate bank account is required if your business is incorporated or seeking a loan. Solo proprietorships are not required to have separate bank accounts, but it is important to correctly label business expense from personal expense for tax purposes. Business expenses are deductions on your Schedule C. If it is essential for your business to have insurance, be sure to do your research and know what questions to ask to get the best prices.
10. Choose Your Accounting System
An accounting system will provide easy bookkeeping, budgeting and tracking for tax filings. Software like Quickbooks allows for money management, expense billing, sales invoicing and reporting.