Ultimate Guide to Starting a Business: Everything You Need
Beginning a new business is an exhilarating and daunting endeavor. Regardless of whether you are launching a small startup or a large enterprise, many things need to be done for the business to be successful. Just like when launching a rocket where being off by even 0.025 degrees would cause you to miss the moon by a million miles, setting up your business on the right path from the beginning is critical. At Torino Accounting Group we work with new owners on setup, business strategy, tax planning, and bookkeeping so they are on the right track from the start.
1. Forming Your Business Entity
Selecting the appropriate legal structure is one of the most significant steps in starting any organization since this decision will affect everything from taxation levels to personal liability, to capital-raising opportunities. Many people who start new businesses think about forming LLCs or corporations in states such as Delaware or Wyoming which can be favorable business environments in certain situations; however, if your company operates in another state then doing this might create unnecessary complexities and costs.
Sole Proprietorship: Best for solo entrepreneurs, but offers no liability protection.
Partnership: Ideal for businesses with two or more owners, but personal liability can be at risk.
Limited Liability Company (LLC): Provides liability protection and flexibility in taxation, making it a popular choice for small businesses.
Corporation: Suitable for larger businesses or those planning to go public; it offers strong liability protection but comes with more regulations and corporate formalities. Knowing if you should be taxed as a C-Corp or S-Corp is critical. If you don’t know — consult a professional
Doing thorough research before deciding which state to host your company’s registration is paramount. Delaware offers advantages if you are looking to raise VC money, but not if you are a single-member LLC. Forming a single-member LLC in Delaware will most likely end just costing you additional money having to manage compliance for entities in multiple jurisdictions. It’s prudent to engage a business attorney who is well-versed in local and state laws to get advice on what would work best for them. Torino Accounting Group works with KKOS lawyers. They are reasonably priced and will create the right business structure.
2. Hiring a Lawyer
Engaging a qualified business lawyer early in the process can save you from costly mistakes. Legal expertise is invaluable when it comes to forming your business entity, drafting operating agreements, and ensuring you meet all regulatory requirements.
A lawyer can help you choose the right business structure, draft essential contracts, and navigate complex legal requirements, including industry-specific regulations. Whether you’re drafting a non-disclosure agreement (NDA) or negotiating a partnership contract, having legal counsel ensures that your business interests are protected.
3. Getting a Bookkeeper
Accurate financial record-keeping is vital for the success of any business. Hiring a professional bookkeeper from the outset can help you set up a robust accounting system, categorize expenses correctly, and ensure compliance with tax regulations.
A bookkeeper will manage your daily financial transactions, including invoicing, bill payments, and bank reconciliations. Regular financial reports provided by your bookkeeper will give you insights into your business’s performance, helping you make informed decisions about budgeting and financial planning. Be cautious about who you hire. We recommend only engaging a CPA, EA, or a bookkeeper who works with a CPA or EA. Many bookkeeping companies either overcharge or don’t have sufficient experience.
4. Opening a Company Bank Account
After forming your business entity, opening a company bank account is a critical step in managing your business’s finances. Keeping your personal and business finances separate is essential for accurate bookkeeping and protecting your personal assets.
Choose a bank that offers services tailored to small businesses, such as low fees, online banking, and integration with your accounting software. You’ll need to provide your business formation documents, Employer Identification Number (EIN), and possibly a resolution from your board of directors to open the account.
5. State Compliance
Every state has different compliance requirements for businesses, including registration, annual reports, and specific licenses or permits. Ensuring your business meets these requirements is crucial to avoid penalties and maintain good standing.
Register your business with the Secretary of State’s office in your state and keep up with annual reporting requirements. Depending on your industry, you may also need to obtain certain licenses and permits to operate legally.
6. Tax Compliance
Understanding and managing your tax obligations is key to avoiding penalties and maintaining financial health. Registering for an EIN with the IRS is one of the first steps, followed by understanding your federal, state, and local tax obligations.
If you have employees, you’ll need to handle payroll taxes, including withholding and remitting federal and state taxes. Additionally, depending on your business location, you may be subject to state income tax, sales tax, and other state-specific taxes. Working with a tax professional can help ensure you’re compliant and taking advantage of any available tax deductions.
7. Conducting Market Research
Conducting thorough market research is essential for understanding your target audience, identifying your competitors, and positioning your business for success. Knowing your customers' needs and preferences allows you to tailor your products or services to meet demand.
Analyzing your competitors helps you identify gaps in the market and opportunities for differentiation. Staying informed about industry trends ensures that your business remains competitive and can adapt to changing market conditions.
8. Creating a Financial Model
A solid financial model is critical for managing your business’s finances and attracting potential investors. Your financial model should include revenue projections, expense forecasting, and cash flow management to ensure your business remains profitable.
When selling products online, especially on platforms like Amazon, it's crucial to factor in selling fees, which can significantly impact your profitability. A detailed financial model will help you understand your break-even point and plan for sustainable growth.
9. Building Your Team
Your business's success depends heavily on the team you build. Recruiting the right talent is essential for driving your business forward. Start by identifying the key roles you need to fill and using job boards, recruitment agencies, and networking to find the best candidates.
Once you’ve hired the right people, effective onboarding is critical to ensure new employees are set up for success. Fostering a positive company culture that promotes collaboration, innovation, and employee satisfaction will help retain top talent and drive business growth.
10. Setting Up Your Business Operations
Operational efficiency is vital for the long-term success of your business. Investing in technology, such as accounting software, CRM systems, and project management tools, can streamline your business processes and improve productivity.
Documenting your business processes ensures consistency and scalability as your business grows. Effective supply chain management is also crucial for businesses that handle physical products, as it directly impacts your ability to meet customer demand and maintain inventory levels.
11. Marketing Your Business
Effective marketing is key to reaching your target audience and growing your customer base. Developing a strong brand identity that resonates with your customers is the foundation of your marketing efforts.
Leveraging digital marketing strategies, such as search engine optimization (SEO), social media marketing, email marketing, and pay-per-click (PPC) advertising, can significantly boost your online presence and drive traffic to your website. Content marketing, including blog posts, videos, and infographics, can help establish your business as an authority in your industry and engage your audience.
Conclusion
As I said before, launching a business is like aiming for the moon — precision is key. A small error in your initial setup can lead to significant challenges down the road, potentially costing you time, money, and opportunities. That’s why it’s crucial to get your business on the correct trajectory from the very beginning. Torino Accounting Group works with new business owners and helps them with business setup, tax planning, and bookkeeping. By following the steps outlined in this guide, you can build a strong foundation for your business, set it on the path to success, and ultimately achieve your goals. Remember, the right start is the key to reaching your destination.