Step 1 – Planning Out Your Business Structure
Will your business operate as a sole proprietor, limited liability company or a corporation?
A sole proprietor = A business that legally has no separate existence from its owner. Income and losses are taxed on the individual’s personal income tax return. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity (e.g., your name is John Smith but you want your business name to be something else), you may need to file a DBA (a “doing business as” name).
A limited liability company (LLC) = A form of business organization with the liability-shield advantages of a corporation and the flexibility and tax pass-through advantages of a partnership
A corporation = A form of business operation that declares the business as a separate, legal entity guided by a group of officers known as the board of directors
Step 2 – Where To Form Your Business
Your location and business structure determine how you’ll need to register your business. Determine those factors first, and registration becomes very straightforward. For most small businesses, it’s best to file formation documents in the state where you’re located.
Step 3 – What name should you choose?
This is where you want to take your time and choose a name that is unique to your business. That will also make you stand out from your competitors.
Why do you want a unique name?
- Because it helps you market your business (makes you stand out in the crowd).
- Less likely that a similarly named business will accuse you of trademark infringement.
- Makes it easier for you to get that domain name for your business as well.
- Complies with state law requirements that corporation or LLC names be different than all other entity names registered in your state.
Once you choose the name you want, do a Google search to see if any similarly named businesses come up. You can also search trademarked names at the U.S. Patent and Trademark Office website, and most states allow you to search registered business names online.
Step 4 – Purchasing a domain name
Once you decide on a name, you need to register a domain name for your business. The domain name is your Internet address, typically ending in “.com”. You can verify with a company like GoDaddy.com or Namecheap.com, and type in the proposed domain name to check for availability. Next, simply register the chosen name with a company like those noted above.
Step 5 – File your business formation papers
To complete your paperwork, you now need to contact your state agency or county. You’ll also need to pay a filing fee, which varies from state to state. Once your corporation or LLC is formed, you’ll receive a certificate confirming that your new business entity exists.
Step 6 – Set-up your finances
Contact your Internal Revenue Service to obtain a federal tax ID number. If you’re a sole proprietor or a single-member LLC, you can opt to use your Social Security number instead.
You’ll also need to open a business bank account for your online business and, if you’re going to be processing transactions through your website, create an account with Paypal or another online payment service.
Step 7 – Understand sales tax and licensing requirements
If you are selling things online, you’ll most likely have to collect and pay sales tax for transactions in any state where your business has a physical presence. However, the law is different from state to state and it’s a good idea to contact your state’s taxation department and/or an accountant to explore this in greater detail.
You should also check with your city or county to see if you need a business license or if you need to register a fictitious business name or DBA.
Step 8 – Getting your website designed
For starters, you might create your own website with the company that you bought your domain name from. But if you don’t like designing or have a hard time with creating, it would be best to find a website designer who will create a professional site for your business. Some designers will also give you a package deal that will include your website, logo, hosting, domain name and regular maintenance.
Once you’ve accomplished all the steps, you’re ready to get going with your online business.
Remember that the Internet is a busy place and you can’t sit back and wait for customers to come to you. Look for ways to actively promote your business through online advertising, social media and old-fashioned word of mouth.
Let me end by saying, if you need help with any of these steps, let us know. Simply reach out to us and allow our business to help your business.
Your digital marketing friends,
Dennis and Brenda
*For our US friends, the Small Business Administration (sba.gov) is a great resource for all of the above.