What Are the Steps to Start a New Business?

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LukeLewis

LukeLewis

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I have been wanting to start a new business for a while now. I'm not happy with my current job. I don't really like the work I do and there is no room for advancement. So instead of putting the time and effort into going back to college or doing some sort of training for another job I may not even like, I feel that starting a business for myself is the best thing to do. I have many interests and it will most likely revolve around internet and media work. I would like to start a blog, review products, expand my photography interests, and do a lot of video for my YouTube channel. I own a drone that takes 4k video, a GoPro camera, and a DSLR camera. I've got all the equipment I need to get going, so I think learning about the steps necessary to make things official is the best thing to do right now. Any advice?
 
Phoenix1

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Just to let you know, you don't need to do anything other than work to start your own business. Many people think it's a complicated process, but honestly, it's nothing more than doing something that makes money, other than being a regular employee for someone else. You don't need to make it "official" - ever.

When it comes time to do your taxes, your situation will become slightly more complex than it was when you simply inserted your W-2 information into your tax program's boxes. You'll need to add up your income and your expenses and put them into the program or service you're using. Or, you'll need to give this information to your accountant so they can do that. If you make enough money each year, you'll also likely need to pay estimated taxes for both payroll tax and federal tax. And don't forget about state tax. So almost all of the work your employer used to do for you, you'll now need to do. It's not difficult though, so don't worry about it.

But again, I hear about people registering their new business with the town in which they live and about getting all sorts of certificates. Perhaps if you're opening a physical storefront or a warehouse or something that would be necessary, but if you're working on the internet, forget all that. No one will ever know. I really don't know why people even do that stuff. I have a hunch it's because they want to feel somehow legitimate.

However, if you'd like to form a "real" business, there are certain steps that might be prudent. I read through the Small Business Administration's page on how to go about doing this and here are the steps they suggest:

Conduct Market Research

It would be wise to learn about the market in which you'd like to enter. Are there a zillion others doing the exact same thing as what you're planning on doing? If so, you'll need to carve out a niche. Is anyone interested in what you'll be offering? If not, you're wasting your time. Since you plan on working on the internet, it's likely that you've already looked into these things. Also, just because there's some competition, that doesn't mean you can't beat everyone else. You just need to be better than they are. When it comes to an audience or a customer base, I can almost guarantee it exists. There are people out there looking for just about anything. And what you describe doesn't seem out of line with the norm.

Write Your Business Plan

This is the step for delusional people. Delusional people love to write business plans because it gives them an opportunity to lie to themselves. Business plans are full of assumptions, such as, "We plan on having 300 people walk into our store every day and purchase an average of $10 worth of products." Yeah, right. The truth is, businesses are lucky to get anyone to walk through their doors and it costs a fortune to get each one to do so. It's called customer acquisition and it's expensive. But honestly, it's smart to write out a business plan that discusses what you plan on doing, how you plan to grow, and how much everything will cost. You'll also want to include information about your market, competition, etc... It'll be an eye opening experience and really, it does teach a prospective business owner a lot about where they stand and how much they'll need to spend to become successful.

Fund Your Business

Will you require equipment to do what you plan on doing every day? Will you need to pay people to help you? Will you be seeking out professionals such as lawyers and accountants to do the things you don't know how to or want to do? Figure out all assocaited costs and then figure out where you'll get the money you'll need.

Pick Your Business Location

If you were going to open a brick and mortar business, I would say this is very important. I mean, very important. Factors such as potential employee pool, proximity to airports, political stability, proximity to earthquake fault lines, and these types of things are critical for some types of businesses. Think about oil refineries and web hosting companies. Since you're small and would like to become what's typically referred to as an internet professional, you can live and work anywhere. I will say that if you plan on doing a lot of writing, photography, and videography, you really should live someplace that's conducive to these things. For instance, situating yourself in the middle of the Sahara Desert wouldn't be a good idea. There's nothing there. The middle of New York City would make a lot more sense.

Choose a Business Structure

I alluded to this above. Business structure is a topic of another post because it's such a large area, but in general, if you're very small and it's your first year of making very little money, it makes little sense to pay the fees and accounting costs related to incorporating. You'd want to remain a sole proprietor. Once you begin making some money and want to start saving some money on your tax burden, then you'll want to form an S-corp or an LLC. These two things are nearly identical, so you'll want to talk to a good accountant before doing anything. When you do this, be sure to discuss these things with the accountant you plan on using well into the future. They have preferences and they'll tell you the tax implications of each option. Attorneys don't know anything about taxes, so it's the accountant you'll want to visit for advice.

Choose Your Business Name

Don't make this any more difficult than it needs to be. For your type of business, you can use your real name or something simple like "Luke Shoots." When it comes to a corporate name, if you decide to go this route, it can be anything. Think "Luke 123 Corp." No one sees this, except for the IRS.

Register Your Business

This step is primarily for businesses that are required to do so, such as very specific types of environmental, political, or non-profit businesses. In your case, you most likely wouldn't need to register with any state or federal agency.

Get Federal & State Tax IDs

When you meet with your accountant about incorporating, he or she will take care of this. When you incorporate, you get a federal tax ID (I believe). You'll use this sort or like you use your social security number when it comes to tax time, except it's for your business. If you remain a sole proprietor, you won't need a new tax ID. You'll just use your social security number. If you'd like to open a business bank account though, you'll need an EIN.

Apply For Licenses & Permits

Depending on where you live, this may be necessary. Check your local, state, and federal agencies to see if this is necessary. For internet bloggers and photographers though, I don't think you'll need much, if anything.

Open a Business Bank Account

I really do recommend you do this. Even if you're a sole proprietor, you can go to your county clerk and get a business certificate or a Doing Business As (DBA) form that you can bring to your bank to open up another account. Or, if you stay small and prefer to keep everything under your name and social security number, you can just open up a second checking account to do business out of. It'll be a personal account, but at least it'll keep your income and expenses separate from your personal expenses. Accountants like to see clean finances. Professional fees add up quickly if you make them do a lot of work for you. And filtering through personal and business expenses is a silly thing to pay an accountant to take care of for you.

I think that's about it. If I missed anything, please let me know. I hope this helps.
 
What Are the Steps to Start a New Business? was posted on 03-04-2021 by LukeLewis in the Business Forum forum.
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