How to Start a Business

1. Give Your Business a Name

Most online guides go on and on about needing to pick a business structure or securing funding before you settle on a name for your business. We think choosing a name for your business is the first step you should take. Your business name should be unique and reflect the identity of your business. It should be clear, easy to spell and pronounce, while also resonating with your target audience. If you’re lucky, the name you choose will be the face of your business for years to come.

Why choose a business name first?

Choosing a name for your business early on allows you to start building your business identity right away. With almost every modern business having an online presence in one way or another, nothing secures your brand more than a domain name that matches your business name. A domain is your first step in getting a business website, which is crucial for your brand and how customers will view your business. Securing a domain now rather than later will enhance the visibility of your business while keeping your competitors from using your business name.

How do I choose a business name?

Your first step is to check to see if your business name is available. If another business is already using your preferred business name, you’ll need to pivot. If the name is available, but you’re not ready to pull the trigger on business formation, you can reserve your business name. You might also consider performing a trademark search to avoid legal issues down the line, and you really want to protect your business name, trademark it.

Get a Domain, Website, Email, and Phone Number Today!

2. Research Your market

You’re not the first person in your neighborhood that’s dreamed of starting a business, but it’s generally a bad idea to jump into business ownership without conducting market research. Before you go all in, ask yourself a few questions about your business:

• Is there demand for my product or service?
• Who are my competitors, and what makes my business different?
• What are my startup costs, and how will I fund them?
• What legal structure is best for my business?
• How will I price my products or services?
• What are the potential risks and challenges?
• How will I market my business?
• What skills or expertise do I need to succeed?
• What are the short and long-term goals for my business?

How do I research my market?

Market research doesn’t have to be exhaustive or expensive. Engage with online communities like Reddit, Instagram, or Facebook groups. Analyze competitors by reviewing their websites, social media, and customer reviews. Conduct informal interviews with potential customers to understand what might be missing in the market. Doing your due diligence now, will pay dividends later.

3. Write a Business Plan

Most business formation websites and guides over complicate business plans. A good business plan should be clear, well-researched, and realistic. Don’t tell potential investors that you plan to do a million in sales your first year as a dog walker. We show you how to keep it simple.

How to Write a Business Plan

A business plan should include relevant information about your business and how you plan to establish and build your clientele. The length of your business plan should mirror the size of your business. If you need investors for your lawn mowing business, a 3-5 page plan should do just fine. But if you’re building a tech startup, you’ll need a more in-depth plan that covers all the bases and digs deep into your business, its potential, and long-term goals.

Most business plans should cover:

• Executive Summary
• Description of Company
• Market Analysis
• Company Management and Organization
• Products and Services
• Marketing and Sales
• Amount of Funding Needed
• Financial Analysis
• Logistics and Operations

Not sure where to start? Northwest offers a free, easy to understand business plan template that you can fill out, save, download, and print at your convenience.

Use Our FREE Business Plan Template

4. Fund Your Business

Unless you’ve got bags of money sitting around or won the lottery, you’ll probably need to raise money to start your business. Most small businesses owners get the ball rolling by using their own savings, taking out bank loans or lines of credit, borrowing against their house (risky), or getting funding from family and friends.

Entrepreneurs can also apply for small business loans from government programs, and local organizations, though this route to funding your business can be slow and difficult. For corporations, angel investors and venture capitalists can provide significant funding in exchange for equity in the business.

5. Choose a Business Structure

The type of business structure you land on will play a major role in how your business is taxed, managed, and owned. The structure you choose will also determine how much personal liability you have in case your business goes bankrupt or gets sued by an angry customer or supplier. Each type of business structure has its pros and cons. Let’s take a look at four of the most popular.

Sole Proprietorships and Partnerships

A sole proprietorship is the default starting place for someone starting a new business. For example, if you’re making sales on Etsy or by walking dogs, but haven’t formally registered your business with your state, you’re a sole proprietor. If you’re doing these things with a business partner, you’re in a partnership.

Both sole proprietors and partnerships are easy to start: simply sell a service or product. However, there’s no legal distinction between personal and business assets for sole proprietors or partnerships. If you or your business partner drop a piano on a homeowner’s foot when operating your moving business, both of you can be sued for your personal assets.

When you have a sole proprietorship or are in a partnership, you are your business. This means the name of your business is your name (Pete Johnson), or a combination of the partners last names (Johnson and Smith). If you want to do business under a name that isn’t your own, you’ll need to get a DBA. A DBA (Doing Business As) allows you to operate under a name that isn’t your legal business name. But remember, a DBA is not a type of business—it’s just a name. Using a DBA doesn’t change the legal status of your business.

LLCs

Short for limited liability company, and perfect for small to medium-sized businesses, an LLC is a legal business structure, formed at the state level, that has its own legal existence, separate from the people who formed it. Like a sole proprietorship, an LLC can be owned by a single-member or, like a partnership, an LLC can have multiple members. The whole point of an LLC is that it shields its owners from personal liability. This means that if an LLC gets sued or can’t pay a debt, its owners aren’t usually required to dip into their personal assets to pay it. This is called limited liability, and it’s why serious business owners often choose the LLC over the financial risk of being a sole proprietor or in a partnership.

Corporations

Some of the most popular businesses on earth are corporations. Think Starbucks, Apple, or McDonald’s. A corporation is a type of business entity with some of the same rights and obligations as a person. Like a person, corporations can enter contracts, hold financial assets, sue and be sued, and pay taxes in their own name. They also provide limited liability protection, which means that their owners (called shareholders) typically can’t be held liable for damages against the corporation.

6. Officially Register Your Business

Time to make it official. If you’re a sole proprietor or in a general partnership, you can skip this part, but remember, if your business goes belly up or gets sued, your personal assets could be on the chopping block. Registering an LLC or corporation with the state creates a shield between the owner of the business and the business itself. Here’s how registering your business works:

Step 1: Appoint a Registered Agent

Most states will require your business to appoint a registered agent. Your registered agent must have a real street address in the state where you do business. Your registered agent must be available during regular business hours (9am to 5pm) in order to receive service of process and official mail on behalf of your business.

You can act as your own registered agent, appoint a trusted employee, or hire a professional registered agent company (hey, that’s us) to fulfill the requirement. If you hire Northwest, we give you our Privacy by Default® pledge to minimize the exposure of and access to your personal data. If we can put our address on a public filing instead of yours, we do it. If we don’t have to list your personal info on state forms, we won’t. We have tough privacy policies to keep your data safe and private.

Step 2: File Official State Paperwork

To legally form an LLC or corporation, you’ll need to file paperwork with your respective state. LLCs will file a form called Articles of Organization. Corporations  file a form called Articles of Incorporation. Once accepted by the state, these forms establish your business as a distinct legal entity, separate from its owners. It is this separation that helps protect your personal assets from events like bankruptcy or lawsuits.

Officially registering your LLC or corporation with the state also fulfills state regulations, ensuring that your business is in good standing and compliant with local laws. You’ll face severe penalties if you’re a sole proprietor or general partnership and list your business as an LLC or corporation without having filed the official state paperwork.

In general, the information an LLC or corporation will need to provide is:

• Name of business
• Business purpose
• Physical address of business or principal office
• Name and address of registered agent
• Name and address of each LLC member or initial board of directors
• Effective start date of business
• Duration of business
• Name and address of person signing articles
• Stock or non-stock and number of authorized shares (for corporations)

Note: The information you list on your articles generally ends up on state records, accessible by the public.

How do I protect my privacy when registering my business with the state?
In most cases, the information you list on these forms will become part of the state’s public record, which means anyone with a computer or smart phone can search and find your business’s information. Things like your name, home address, and even phone number can be easily accessed by weirdos and grifters.

Want to keep your private information under wraps? Hire Northwest as your registered agent. We have offices in every US state and jurisdiction, and make it our policy to never give out, sell, or allow anyone to get anywhere near your private information!

Step 3: Pay All Business Formation Fees

The cost to officially form your LLC or corporation depends on where your business is located. For example, Colorado charges just $50, while Massachusetts will hit you for $500 for an LLC, and $275 for a corporation. No matter the state, expect to pony up some dough in order to register your business.

7. Get Federal and State Tax IDs

An EIN (also called a Federal Employment Identification Number or FEIN) is a unique nine-digit tax ID number issued by IRS to businesses. Similar to a social security number, an EIN is used by businesses to legally pay employees, open bank accounts, apply for loans and licenses, fulfill tax obligations, and to help protect the identity of the business owner. Getting an EIN is free from the IRS, but can be a hassle.
Hire Northwest and we can get your business an EIN for $50.

8. Apply For Necessary Licenses and Permits

No matter what type of business you operate, you will most likely need to obtain state and local licenses and permits in order to legally conduct business. This requirement includes sole proprietors and general partnerships as well. At a minimum you’ll likely need a tax license from your state (a tax license allows you to legally collect sales taxes from customers) or jurisdiction. In some cases you’ll also need a tax license from the county, or city where your business operates. business.
But that’s not all. Depending on the type of business you engage in, you may need certain permits and other regulatory licenses in order to do business. For example, if you open a boxing gym or yoga studio, you’ll need a health department license and often an athletic license from the state. If your business sells alcohol or tobacco, you’ll need federal and state licenses. If you build houses or repair roofs, a contractor’s license is required.

It’s up to the business owner to properly apply for and receive all proper licenses. It pays to be aware of your state’s licensing and permitting requirements before you jump into the deep end of business ownership.

Check out our page on How to Get a Business License in Every State.

9. Open a Business Bank Account

Your next step is to open a business bank account. Why can’t you use your personal bank account to do business? Here’s why:

• Boost Your Liability Protection
  A separate account will help maintain the limited liability status of your LLC or corporation. If you don’t keep your personal and business finances separate, a court could find that your business is not actually separate from you, the owner. In the event of a lawsuit or bankruptcy, your personal assets (house, car, savings, 401k, etc…) could be used to satisfy any debts you owe.
• Look Professional
  A business bank account enhances your credibility with both customers and vendors. It allows you to accept and make payments using your business name, and it makes it easier to accept credit credit card payments.
• Simplify Record Keeping
  During tax season you’ll be glad that you’ve got a business bank account. Having a separate account simplifies tracking income and expenses, which makes tax preparation and financial management easier.
• Access Banking Services
  Business accounts often come with features like credit cards, business loans, and other merchant services that can help manage and grow your business as needed.
• Build Business Credit
  Establishing a business bank account can help you build a credit history for your business, which is important for future financing needs.

How do I open a business bank account?

To open a bank account for your LLC or corporation, you’ll likely need:

• Personal identification
• A copy of your formation documents (Articles of Organization or Incorporation)
• Your EIN
• An LLC or corporate bank resolution signed by the LLC members or corporate directors

10. Get Your Business Online

Online visibility is crucial for small businesses because it enhances your brand and gets your business in front of potential customers. A strong online presence that includes a website, domain name, and social media accounts boosts credibility. In fact modern digital age consumers often trust businesses with an active website and social media presence. Building your online identity for your business allows for targeted marketing campaigns, which can help you reach specific customer demographics.

How do I get my business online?

Building a strong online identity for your small business involves several key steps:

• Define Your Business Identity
  Clarify the mission and values of your business. Create a unique value proposition that sets your business apart from competitors.
• Choose a Domain Name
  Select a memorable and relevant domain name for your website that reflects your brand.
• Create a Professional Website
  Build a user-friendly website that showcases your products/services, includes essential information, and is optimized for mobile devices.
• Set Up Social Media Profiles
  Choose platforms where your target audience is active and create consistent profiles that align with your brand identity.

When you hire Northwest to form your business or be your registered agent, we’ll set you up with a domain name, a customizable website, business email address, phone number (with local area code), and a real business address. Our Business Identity services start out with a risk-free, no cost 90-day trial. Your domain name is free for the first year, with affordable options to renew.

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Starting a Business in Your State

Every state has some major pros and cons when it comes to forming a business. Click any state name below to learn more about doing business the right way in your state.