How to Start a Business

Creating a Business Plan

Most websites and guides overcomplicate business plans. Down the road, sure, you’ll want a fancy, formal business plan to show to potential lenders or investors. But you won’t get lenders or investors without sales. And you won’t get sales until you get started. What you need right away is to answer a few basic questions.

• What am I selling?
• Who is buying?
• How do I connect to buyers?
• What are my costs?
• How much do I charge?

On our Small Business Ideas page, we’ve answered these questions for you for different types of businesses. Want to start a home-based graphic design business? How about a cleaning service? We’ve done the legwork for you in our ever-growing list of industry-specific guides. Learn which tools you’ll need, steps you should take and even how much to charge in our free guides.

On this page, you can also find articles on popular business models, such as opening a franchise or selling products online. In addition, we tackle logistical questions you might encounter at every stage of your business, from choosing a business name to hiring employees.

SMALL BUSINESS IDEAS

Sole Proprietorships and Partnerships

Have you made your first sale? Congratulations, you have a sole proprietorship or partnership. Unless you form an entity like an LLC or corporation, your default business is a sole proprietorship (one owner) or a partnership (multiple owners). And your business? It’s an extension of yourself. It’s not a separate legal entity. So all your company’s liabilities are yours personally.

On one hand, sole proprietorships and partnerships are simple. They don’t require state paperwork to formally open or close. They’re cheap (unless you get sued or go bankrupt). There are no state filing fees or annual report fees. On the other hand, there are major downsides. No liability protection for yourself or your investors. No tax flexibility. No stocks. No prestige. No cool name without a DBA.

Because of these downsides, once you’ve proven your concept and made some sales, it’s time to protect yourself and your investors with an actual business entity, such as an LLC or corporation.

Why Form an LLC or Corporation?

With an LLC or corporation, you take on considerably less risk and have better control over how taxes affect your earnings.

LLCs and corporations are business entities formed by filing articles with a state agency, typically the Secretary of State. Because these entities are subject to state filing fees and reporting requirements, they cost more to start and maintain. However, in exchange for extra fees and paperwork, you receive some significant advantages and protections—namely limited liability and tax flexibility.

• Limited liability: Both LLCs and corporations are legally separate entities from their owners. In other words, owners and investors are not personally liable for the debts and obligations of the business. Not only does this help protect your personal finances, but it also provides a much safer and more attractive scenario for investors.
• Tax flexibility: Unlike default business structures, LLCs and corporations have multiple tax election options. For instance, both can be taxed as C-corps or S-corps. Even if tax talk bores you to tears, it’s easy to understand that having more options is more advantageous. You can pick the option that will save your business the most money or allow for the greatest opportunities.

What about Privacy?

Many owners have concerns about maintaining their personal privacy when starting a business—and rightly so. Sole proprietors and general partners literally share their personal names with their businesses. LLCs and corporations require public state filings. But, with an LLC or corporation, there is an easy step you can take to better protect your privacy: hiring the right registered agent service.

When you form an LLC or corporation, any personal information you include on your formation paperwork becomes part of the permanent public record of your business. So, if you list your private address for your principal or registered office (or for your member, manager, director or officer addresses), that information is typically available to anyone. Scammers, spammers, solicitors, competitors, data miners, marketers, weird neighbors—anyone.

However, as your registered agent, we can list OUR business address instead of your personal address when we file your formation paperwork. It’s an extra layer of privacy protection that you cant’ get filing yourself—or hiring a standard filing service.

Maintaining privacy is a powerful reason professionals choose Northwest Registered Agent to form their businesses. We practice Privacy by Default® to help protect our clients’ personal information.

LLC vs Corporation

So how are LLCs and corporations different? Mostly in ownership, management and taxation. LLCs are owned by members and can be run by the members themselves (like a partnership) or by managers (like a corporation). LLCs also have the greatest number of tax election options. LLCs are initially taxed as disregarded entities or partnerships but can apply to be taxed as a C-corps or S-corps.

In a standard corporation, shareholders own pieces of the corporation, represented by shares of stock. Stock is easily transferable, making investing in a corporation fairly simple. Shareholders elect a board of directors to make business decisions, including appointing officers. Corporations are automatically taxed as C-corps but can apply to be taxed as S-corps. Many nonprofit corporations can qualify for tax-exempt status as well.

Not sure which entity is right for you? Our LLC vs Corporation page takes a deep dive into the pros and cons of each business structure.

Granted, starting an LLC or corporation takes a little know-how. That’s why we’re here. Northwest Registered Agent is at your beck and call to help fill knowledge gaps and bolster your ideas. We also have a whole team of local experts, our Corporate Guides®, who can answer your toughest questions by phone or email. And of course, we can form your LLC or corporation for you, so you can get started fast with the support and privacy protection you deserve.

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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.