According to the SBA, there are 31.7 million small businesses in the U.S., and half of them are home-based. If you’ve been thinking about starting a small business from home, here are five steps to get started.
Write a business plan
The first step to starting a small business is coming up with a business idea that interests you. Once you’ve done that, you need to write out your business plan.
A business plan is a roadmap for your business, and it helps you gain clarity. A strategic business plan is also important if you plan to bring on investors or apply for small business financing.
According to the SBA, most business plans fall under the category of a traditional business or a lean startup. A traditional business plan is very comprehensive and will include many different sections, including an executive summary, a description of your services or product line, and financial projections.
In comparison, a lean startup business plan is a high-level overview summarizing the most important aspects of your business. This business plan can work if you don’t plan to seek out funding.
[Read more: When to Update Your Business Plan]
Choose a business structure
The business structure you choose affects many different aspects of your business, from how much you pay in taxes to whether you can hire employees. There are four main types of business structures you can choose from:
- Sole proprietor: A sole proprietorship is the easiest way to get started, but there is no legal separation between you and the business. This means your personal assets will be at risk if you get sued.
- LLC: An LLC is easy to set up, and it creates a legal separation between you and the business, so your personal assets will be protected in most instances.
- Partnership: A partnership is formed by two or more people, and it could be a good option for a business with multiple owners.
- Corporation: A corporation is a separate legal entity that’s owned by its shareholders. It’s a good idea to speak to a business attorney if you think you want to set up a corporation.
[Read more: How to Start a Business With Your Spouse or Partner]
The business structure you choose affects many different aspects of your business, from how much you pay in taxes to whether you can hire employees.
Open a business bank account
Once you’ve chosen your business structure, it’s time to set up a business bank account. A business bank account separates your personal and business finances and can make things much easier come tax season.
You’ll need to apply for your employer identification number (EIN) before you can open a business bank account. Your EIN is a federal tax number that identifies your business entity. You can apply for free on the IRS website and receive your EIN within minutes.
Work with an accountant
Taxes are confusing for many small business owners, which is why hiring an accountant is invaluable. If you expect to owe more than $1,000 in taxes, you’re required to pay estimated quarterly taxes to the IRS.
Your accountant can tell you what you owe each quarter and at the end of the year. Your accountant can also ensure you’re tracking your expenses correctly, and tell you what expenses you can deduct on your tax returns.
Start selling your products or services
Once you’ve come up with a plan and have a legal structure in place, it’s time to test out your business idea and begin selling your products or services. Successful businesses are measured based on profitability, so you want to be sure there is a demand for what you’re offering.
Expect that there will be missteps in the beginning, and it may take time for you to gain traction. Be prepared to learn from your mistakes and adjust your strategy as you go. The important thing is that you’re creating a solution that’s relevant and fills a need for your customers.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.
