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How to Start a Business

We make the process of starting a business fast and easy. Our small business experts navigate you through the business startup process. To get started, we’ll take you through the steps needed to plan your company, including choosing the right business structure, picking a name and location, and registering your business. Then, we’ll walk you through details like getting a business Operating Agreement, obtaining your federal Employer Identification Number (EIN), and where to look to make sure you have the right licenses or permits for your business.

LLC – Limited Liability Co

The simplest and most flexible business structure to protect your personal assets.

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Corporation (C-Corp)

This more complex structure can issue shares or take the business public.

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LLC with S-Corp Election

This tax designation avoids double taxation when your LLC is profitable.

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Guide – Start a Business

Read our “How to Start a Business” guide to better understand the minimum requirements to starting your new business and learn how we help you with each step.

1. Develop Your Business Plan Strategy

Once you have a solid business idea in your mind, it’s time to do some strategic planning. Doing research upfront will help you plan the details of your business. Those details will help you avoid some costly mistakes and start seeing success quickly.

Begin by Researching Your Business Target Market and Competitors

The more you know about your potential customers and competitors, the better decisions you can make regarding your product or service. Market research will help you achieve that knowledge when you go to open a business. Beyond helping you make good decisions, arming yourself with quality market research will help when looking for loans and investments.

There are a few ways to conduct your research:

Whatever form of market research you utilize, you want to end up with key pieces of information:

  • Is there a need for your company?
  • How many customers will need what your company offers?
  • Local demographics, including employment rates, income ranges, and ages
  • Where are your customers, and where should your company be located to be accessible?
  • What is your competition, and what pricing do they use?

Create a Business Plan

Taking the time to set up a business plan does more than help find investors. It helps you find and keep to your path through each phase of opening, running, and growing a business.

When creating your business plan, there are some key elements to include in starting a business:

Determine Your Business Starting Costs

Knowing your startup costs allows you to prepare and avoid unexpected expenses that can sink you. Your costs will be different depending on if you have an online presence versus a physical space. The types of goods or services you offer will also impact your expenses.

Regardless of the type of company that you plan on starting, you should be prepared for common expenses, such as:

  • Equipment and supplies
  • Website design
  • Fees for filing, licenses, and permits
  • Insurance
  • Marketing services/materials
  • Utility costs
  • Professional services like a lawyer or accountant

Start Raising Your Business Startup Capital

Once you have determined how much funding you need, you need to determine how you will put that funding together. There are three basic ways to fund your business startup: self-funding, investors, and loans.

2. Choose a Business Structure to Start

Deciding on the structure of your business is an important decision. Look at the pros and cons of each option before selecting one. The structure you choose will determine your tax liabilities, how you organize and run your business, and the amount of liability protection available to the owners.

You don’t have to make this decision alone, though. ZenBusiness has information and resources to help you make the best decision to open a business. Start by reading the information below, and then contact us to get started.

Sole Proprietorship Icon

Sole Proprietorship

Deciding on the structure of your business is an important decision. Look at the pros and cons of each option before selecting one. The structure you choose will determine your tax liabilities, how you organize and run your business, and the amount of liability protection available to the owners.

Pros of a Sole Proprietorship

Cons of a Sole Proprietorship

You may already be a sole proprietor and not even know it! Find out more in Am I a Small Business Owner?

Partnership Icon

Partnership Business

If you have at least two people starting a company together, you can form a partnership. A partnership allows for a company’s profits to be passed through to the owners, which means taxes are reported on the individual tax returns only.

There are three kinds of partnerships. In a general partnership, the owners manage the company and take on the profits and risks together. A limited partnership will have general partners but also limited partners who are investors with no control and without the same liability. A limited liability partnership provides some liability protection to the partners by shielding them from the malpractice or wrongful actions of the other partners, though this liability protection can vary by state.

Pros of a Partnership

Cons of a Partnership

LLC Icon

Limited Liability Company (LLC)

An LLC is set up as its own legal entity, but its profits pass through to the owners or members and are taxed only on their individual tax returns. There are no shareholders and no stock. The only businesses that might not be eligible in some states are professional partnerships, which would form a limited liability partnership or a professional limited liability company. Professional partnerships are businesses like a doctor’s office or law firm.

Pros of an LLC

Cons of an LLC

C Corporation Icon

C Corporation

C corporations are owned by shareholders who elect a board of directors. The board leads the decision-making. C corporations are a separate entity from the owners, protecting their liability. However, with a C corporation, the business will be taxed, and then the individual shareholders will be taxed on the income they receive (known as “double taxation”).

Pros of a C Corporation

Cons of a C Corporation

S Corporation Icon

S Corporation

An S corporation is not really a separate kind of business structure, but a tax election status. A C corporation or an LLC can apply for S corporation status with the IRS. S corporation status is often a way for C corporations to avoid double taxation because they’re taxed like a general partnership or sole proprietorship.

One reason an LLC might opt for S corporation status is that it can save the owners money on self-employment taxes by splitting income into two groups, salary and distribution. The IRS only requires the owners of an S corporation to pay the 15.3% self-employment on their salary and take the remainder as a distribution not subject to self-employment tax.

S corporations do have some restrictions, though. An LLC or C corporation can file to become an S corporation only if they meet the following conditions:

The tax issues around S corporations can get complicated, so it’s wise to consult a qualified tax professional for guidance.

Pros of an S Corporation

Cons of an S Corporation

B Corporation Icon

B Corporation

B corporations are for-profit companies that are also driven by a mission to benefit the public. A global nonprofit organization called B Lab has certified these companies for their social and environmental performance. They are taxed the same as a C corporation, but their purpose and transparency are different. Some states require B corporations to submit an annual report showing their work toward their mission.

Pros of a B Corporation

Cons of a B Corporation

3. Decide on a Business Name and Location

Deciding on your business’s name and location is one of the most important decisions you will make. You want a name that helps you build and then protect your brand. The wrong location can make it difficult to attract customers. These are two decisions you should not rush, as you’ll be living with them for a long time.

Choosing a Business Name

When you are looking for a business name, you want it to be unique and descriptive. There are a few requirements you will need to meet when selecting a name. If you have decided on an LLC for your business structure, all states require some form of “LLC” to be included in the name. You won’t be able to use a word that implies an illegal activity: For example, if fireworks aren’t legal in your state, don’t use “fireworks” in your name.

Make sure you aren’t mimicking another business name too closely. That can be avoided by researching available names in your state. Visit your Secretary of State’s website and use their searchable database.

Once you’ve selected your name, you may want to reserve the name with your state. Most states allow you to do this for a specific period, which gives you an opportunity to follow the rest of the steps to get your business registered and know your name is safe.

You may also want to register your DBA (“doing business as”) name. There are two main reasons someone would take this step. The first is if you have a sole proprietorship or general partnership and want a unique business name. The second is if your company will operate under a different name than its legal name: For example, “ABC Corporation” has two lines of business, and one operates as “ABC Puzzles” and the other as “ABC Toys.”

Filing for your DBA will take a few weeks, and each state, county, and city will have different rules. Generally, though, you may need to provide proof of good standing and have a unique name. You might need to make public announcements that follow the rules of your area and have a reliable payment method. You will also need a Social Security number or a federal tax ID (EIN).

You may also wonder if your name should be trademarked. If you want to pursue a trademark, you will start by searching the U.S. Patent and Trademark Office (USPTO) database to see if it is federally trademarked. Once you know your name is unique, you have the option of applying for a trademark. Registering your trademark at the federal level comes with broader protection, which can be good if you plan to do business across multiple states, but it can be more difficult to obtain. Registering a state-level trademark is often an easier and quicker process, though it only applies within your state. Trademarks don’t last forever, though. You will need to follow the deadlines and requirements to keep your trademark current.

Choosing a Business Location

Searching for the right business location is like searching for the right home. Before you get started, sit down and make a list of the things your business needs or should avoid. Don’t begin unprepared because once you are locked into a location, it can be costly and time-consuming to correct the problem.

There are a few things to consider. Does the location meet the operational needs of your business and growth strategy? What will the location cost (think about rent, utility, and any other costs you will incur from being in the space)? Some businesses need to consider things like demographics. Retailers will want to consider the kinds of foot traffic and parking that a location affords. They also want to consider if the area allows their brand to fit — for example, is it an upscale area or a more relaxed environment?

Consider if the location has the right infrastructure for your business, like technology needs or accessibility. Understand the local environment. What kinds of regulations or ordinances will you be following, and what taxes do you need to pay?

4. Register Your Business in Your State

Now that you have a plan, a name, and a location, it is time to register your business with the state. If you have a sole proprietorship or general partnership, you don’t need to take this step.

For everyone else, it means that before you can officially begin your business, you need to file formation documents with the state where you will do business.

For most states, this will require visiting the Secretary of State website, but before you do, there are a few decisions you need to make.

Appointing a Registered Agent for Your Business

First, get a registered agent. A registered agent is a person or entity who is the point of contact between your business and the state. They accept legal notices on behalf of your company and make sure you get them in a timely manner.

All states allow you to serve as your own registered agent. That may seem like a simple solution, but there are disadvantages. A registered agent must be available during business hours. Running your business and being in one location all day can be difficult. It can also be inconvenient to be served with legal documents while meeting with a potential client.

Hiring an outside registered agent service relieves you of the burden and can make your life a lot easier. A few advantages include:

Filing Articles of Organization for Your Business

To register with the state, you need to file the Articles of Organization. Visit your Secretary of State’s website and find the correct form and information on filing fees, which can vary by state. Most states allow for online filing.

Make sure you have all the information needed for the form. Each state has a different application, but most of them include:

5. Create a Business Operating Agreement (for LLCs)

If you are creating an LLC, your next step will be creating an Operating Agreement. Only a few states require the document, but it is important for your business to have one. This document is where you will set in writing the way your business will be run, managed, and governed.

Benefits of an Operating Agreement

An Operating Agreement gives your LLC and its members several advantages, including:

How to Create a Business Operating Agreement

Operating Agreements should be customized to your particular business; however, there are some standard items to include. When it’s time for you to create your business’s Operating Agreement, you could hire an attorney. However, that option is expensive and takes time.

6. Get a Tax ID for the Type of Business You Want to Start

Businesses — or, in the case of an LLC, the individual owners — must know and follow the laws around federal, state, and local taxes. To make sure you are collecting and paying the right taxes, start by obtaining your identifying numbers.

Getting a Business Employer Identification Number (EIN)

The first number you need is your federal Employer Identification Number (EIN). This number is assigned to your business by the IRS. Most businesses need to obtain this number. You can determine if your business requires an EIN by looking at the following requirements:

Even if your business is not required to obtain an EIN, you should get one anyway. EINs are helpful for a few reasons. Your bank may require you to provide your EIN before opening a business bank account. It also prevents you from needing to use your Social Security number for business purposes, which helps prevent fraud.

Getting a State Tax ID Number

What taxes apply to your business and the tax system will vary from state to state. You need to register with your state. Your state’s Department of Revenue is a good place to look since many states maintain the system they use. Don’t forget about local taxes, as well. You’ll need to investigate and sign up for the tax system in your business’s home city and/or county.

Identifying State Taxes That Apply to Your Business

Different types of businesses may be required to pay different taxes. Some of the most common taxes include:

To learn more about the taxes your business is subject to, reach out to your state Department of Revenue or its equivalent.

7. Apply for Business Licenses and Permits

Just because you have formed your business does not mean you are ready to operate legally. You may need additional licenses or permits in your state or local area. Whether it’s a general business license or an industry-specific license, it’s important to obtain the right permits to stay in compliance and keep your business running smoothly.

Business License and Permit Basics

Some of the most common types of business licenses you may need include:

Researching Permits and Licenses for Your Business

Ensuring you obtain the licenses and permits you need can be time-consuming, but it’s an essential step. Once you have them, make sure you know if they expire and when you need to reapply. Without them, you may find yourself with fines or having to stop doing business.

ZenBusiness Simplifies Starting a Business

The excitement of starting a business can fade when faced with the daunting steps of actually getting that business up and running. There are a lot of details to consider, choices to make, and paperwork to fill out.

Don’t let the process slow you down. ZenBusiness can help you in starting a business in no time. Our experts can assist you at each of the stages we’ve discussed in this “How to Start a Business” guide.

We won’t stop there, either. Once you are up and running, it’s time to start looking at how to grow. We’ve put together a Run Your Business guide to provide expert advice on operating and expanding your business.

ZenBusiness will work with you to make it easy in starting, running, and growing your business. Our plans include business formation, registered agent, name registration services, and more. Our experts are ready to get started today, so you can focus on your business’s business.

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