Congratulations on having a million-dollar idea! For some entrepreneurs, coming up with the concept for a new product or service is the most challenging part of starting a business. For others, it is all the complicated steps you have to take to get your business off of the ground.
Drawing on my experience as a small business attorney, I’ve put together a list of 9 things you need to consider when turning your brilliant business idea into a money-making machine.
Consideration #1 — What Does the Market Research Data Say?
Your idea may seem like a winner, but will it pay your bills? Market research is essential for determining the scope and feasibility of your business. Well-developed research will help you answer questions like:
- Who is your target market?
- Where do they live?
- How is the best way to reach your customers?
- What pricing level will your target customers support?
- How much competition will you face?
The United States Small Business Administration has conveniently compiled a large amount of data for small business owners. Accessing this page is an excellent first step if you plan to conduct your own market research.
Consideration #2 — What Is My Business Plan?
A business plan should be particularly tailored to your circumstances and explain how you will turn your idea into revenue. It will become a reference point for you to make sure you did not unnecessarily skip steps or cut-corners before launching operations.
When developing a business plan, determine if you want to create a traditional plan that reads like a comprehensive report on your business or a lean startup plan that provides a 10,000-foot view of your ideas. Remember that not only does a business plan serve as your startup playbook, but banks and other investors will decide on your company’s viability after viewing your business plan.
Consideration #3 — What Will My Business Be Called?
Your business name is a vital component of your brand identity. It needs to be unique and convey to potential clients the type of business you will operate. It also doesn’t hurt to make the name memorable. Check your state’s business registry to determine if your desired name is available.
Consideration #4 — How Will My Business Be Funded?
There are generally three primary sources of startup capital for small businesses:
- Self-funding
- Angel investors who provide money in exchange for an equity share of your future profits
- Lenders who loan you funds to be paid back with interest
Unless you plan to fully self-fund your startup, you will need to present your business plan to potential funders. You need to know how much capital you will need and whether you would prefer to work with investors or take out a loan. No matter which route you take, a thorough and well-crafted business plan is essential for obtaining third-party funding.
Consideration #5 — What Should the Legal Structure of My Business Be?
A more complicated step when starting a new business is determining what legal structure you will use. Sometimes, the legal structure will be evident from the beginning, such as if you team up with another accountant to form a partnership. Other times, you may not know what the best organization is until further along in the startup process.
Check out my blog What’s the Best Legal Structure For My Small Business? for an in-depth guide to choosing the right structure for your company.
Consideration #6 — Am I Complying With Tax Laws and Licensing Requirements?
Any company that plans to have employees will need to register for a new Employer Identification Number (EIN) with the IRS. You can obtain an EIN even if your company does not plan to have any employees, but it is not a legal requirement. While it sounds complicated, you can quickly and easily fill out an application online.
You may also need to file additional registration documents with the IRS depending on the type of entity you select for your business. For example, if your business is an LLC, the IRS will automatically tax you as a sole proprietorship if you have one member or a partnership if you have 2 or more members. If you want to be taxed as a corporation instead, you’ll need to file an additional form.
On top of federal taxes, every state has its own tax regime. So, you’ll need to ensure that your company files the proper state and local taxes once you are up-and-running. Complying with tax laws requires careful documentation from the start, so make sure you have a system in place to keep your financial books in order.
Most states will also require you to register and license your business. Once you have a company name, you can register the name with your secretary of state. Your company may also need to obtain a license to do business within the state.
Consideration #7 — Where and How Will I Operate My Business?
Before you can begin operations, you’ll need to decide whether to operate out of a brick-and-mortar location or opt for a virtual model. In these changing times, more and more businesses are choosing to use virtual offices in place of traditional workplaces. However, whether an online business is feasible for your idea depends on your industry and the specifics of your plan.
If you do choose a brick-and-mortar operation, you’ll need to consider what you need from a storefront, office, or warehouse. You should balance your current needs with future projections, as commercial leases can tie you to a specific location for multiple years.
Consideration #8 — What Employees Will I Need?
Similar to addressing your real estate requirements, before opening for business, you should determine what employees or independent contractors (if any!) you will need to hire. You may only need an administrative assistant or delivery driver, but you will need to plan for taxes, payroll, and workers’ compensation insurance if you have any employees.
Consideration #9 — Do I Need To Consult With a Business Attorney?
Starting a successful business involves balancing many complex and interconnected factors, some of which can even conflict with each other. You may want to avoid heavily leveraging your new company with debt, but you also may have determined you need a prime location for your first storefront.
Additionally, a large number of your decisions as a business owner will include legal considerations. Not only do you need an understanding of business law to select the most advantageous business structure and obtain the licenses you need, but receiving loans and hiring employees also requires legal knowledge. Having an experienced business lawyer to guide you at every step of the process will ensure that you comply with the law and make the best decisions for your business.
Mod Law Firm is here to help you turn your business idea into a reality! Schedule an introductory consultation today to learn more about the services we can provide as you start your small business.