Starting a business can be incredibly exciting. Here’s your chance to make a mark on the world. To provide something of value in the way that you believe is best. To prove yourself to your colleagues and friends. To make a lot of money. To call all the shots. There are lots of reasons people get excited to start their own business, and your reasons may be these, or they may be completely different.
With all of the excitement, there can also be a lot of trepidation. After all, there is a LOT to do when starting a business. Here are some of the steps you will want to take in order to start your very own business. We also explain whether you will need a business credit score.
Table of Contents
Come Up With The Right Idea:
You are about to invest a lot of resources into this business. It is really important that the idea at the core of the business is a solid one. You may want to spend a lot of time brainstorming and researching. Getting feedback from friends, mentors, and potential clients will also be helpful.
They say that ideas are worthless without execution. So when you find the right idea, don’t stop there! Keep going and actually build the business. Are you afraid that you might not be successful? It might be a good idea to consider at the beginning of your journey your own definition of success. If your definition of success is creating a unicorn venture, then maybe you will not succeed – only time will tell. However, if your definition of success includes learning a lot about business and about yourself in the process, then you are 100% guaranteed to succeed.
Make A Business Plan:
Making a business plan will help you make sure that you have considered everything about the business you are building. What will you sell? How much will you sell it for? Who will you sell it to? How will you find customers? How much money do you expect to make? How will you fund this business? How will you build your team?
A good business plan will answer all of these questions and more. However, there is no need to write a book. A 5-10 page business plan is more than sufficient. The point is not to win an award for the most beautiful business plan, but to make an effective business plan that helps you think through how to build your business. This business plan will also help you communicate your plans with potential investors, partners, and other supporters.
A solid business plan is a live document. It is not something that you write and forget about. It is something that you come back to frequently, and update based on how your business is evolving.
Choose An Entity Type:
It is a good idea to legally form your company. When doing so, there are a few different business entity types that you can choose from. Some of the common entity types are sole proprietorship, limited liability corporation, a c-corporation, and an s-corporation.
A sole proprietorship is a company owned by one person. This type of business entity does not provide any protection for personal assets from business liabilities. It is the simplest way to start your business because you do not have to do anything to have this business entity-type. Just start doing business.
A limited liability corporation is a very popular type of business entity because it does, generally speaking, offer some protection for personal assets from business liabilities. While there is more paperwork involved than with a sole proprietorship, there is less than in other common structures.
An S-corporation offers some tax advantages over other structures but is much more complex to set up than sole proprietorships or limited liability corporations. A C-corporation offers less tax advantages than an S-corporation and is similarly complex to set up, but has some advantages like being able to have more than 100 stockholders. Both S-corporations and C-corporations have many more complexities, and if you are seriously considering one of these structures, you should definitely be working with a lawyer and an accountant.
Choose A Name:
What name will you give your business? There are many considerations here. You are going to want to check if there are other businesses with the same name. You will want to check if the name is trademarked. You will want to choose a name with good meaning, and make sure that it does not have negative connotations in other languages and cultures that you should at least be aware of. You might choose to use part of your own name or the name of someone you love. On the other hand, you might choose to include clues as to what your business does in the actual business name.
As you can see, there is a lot to consider in choosing a name! Some people will spend less than an hour choosing a name for their business, while others will mull over it for months (hopefully while still in the planning stages and before quitting their full-time job!).
Open A Business Bank Account:
It is not mandatory to open a business bank account but it is heavily recommended. It has major benefits which include: helping establish your business finances as separate from personal finances, protecting your personal assets, being taken more seriously by potential investors, making it easier to successfully get through an IRS audit, etc.
In order to open a business bank account, you will need to get a tax id number for your business. These are similar to social security numbers, except that they are for businesses instead of for people.
You Have A Lot Of Work To Do!
The good news is that you do NOT need to add getting a business credit score to that list when you are just starting your business. A business credit score is not something that is created overnight, but rather, a score is built over time based on the financial actions that your business takes. It represents the likelihood that your business will pay its financial obligations to financial partners, suppliers, and other debtors.
You do need to make sure that you take the right steps along the way so that you do not hurt your business credit score. This means you need to pay all of your bills on time. You need to make sure to not overutilize any credit that you have access to (preferably, using less than 30% of your credit limits). You need to make sure to avoid liens and legal judgements.
However, it does not hurt to get started on building your business credit score soon after your business is up and running. That way, your business will be ready to go when it is time to seek financing or a new trade partner. In the early days of running your business, you have enough to worry about without having to learn the ins and outs of business credit building. At CreditPush, we can help boost business credit scores from zero. You can also check your credit score. This tool is free.
Good luck in starting your very own business! It will surely be a great adventure.
About the Author:
Vlad Hordiychuk is the Product Owner of CreditPush. He has held leadership and managerial positions in fintech, information technologies, and global supply chain ventures. He is trilingual, has a business degree from Ivan Franko University, and has Google digital marketing certification. He spends his free time walking his dog Space and ballroom dancing.
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