By: Katie Rosehill,
Type of Business
One of your first decisions is to determine what type of business you want to start. Make a list of your experiences, likes and dislikes, interests and talents. Choose a business that puts your qualifications to work in a niche you love. Consider a part-time business until enough income is generated to quit your full-time job. Types of businesses include selling products, manufacturing products and providing services. Affiliate marketing on the Internet is an example of selling products. Creating baby clothes to sell at arts and crafts shows is an example of manufacturing products. Services include pet sitting, running errands and freelance writing.
Licensing and Registrations
Nearly every state requires a business to be licensed. Some cities do as well. For example, the City of Philadelphia requires a business license even if all you do is blog and sell advertising on the blog. Don’t skip this step since there are penalties if you operate without the proper licensing. You may have to pay a fine. Your state’s small business office should be able to assist you. If your business is in your home, check with your zoning office and your homeowner’s association. Some HOA prohibit businesses.
Choosing a structure for your business protects you and your assets. A sole proprietorship is simply you operating the business on a personal basis. Any income is taxed at your personal tax rate. Any debts are your personal debts. If the business gets sued, you personally are liable. Other structures include partnerships, limited liability corporations, S Corporation and C Corporation. Each structure has different requirements and protections. For example, an S Corporation has to complete federal income tax forms but doesn’t pay taxes on income generated. The income flows through to the owners of the S Corp and is included on the owner’s tax form.
Funds are required to start a business in most cases. Even if your business is selling products online for a commission — this is known as affiliate marketing — you still need to have funds to pay for Internet access, a web site and hosting. Come up with at least a three-month budget of what you’ll need to get started.
Keep the business’s funds separate from your personal funds. Obtain an Employer Identification Number, EIN, from the Internal Revenue Service, to use for setting up a business checking account, accepting payments through third party processors and to complete W-9 forms from clients.
Develop a business plan that includes sections on product or service description, competition, marketing strategies and financial forecasts.