According to the Small Business Administration's Office of Advocacy, in 2008 there were 29+ million small businesses in the United States, and half of all American workers were employed by small businesses.
Forming your business
The business structure you choose will have legal and tax implications.
In selecting a business entity, there are several criteria you need to evaluate and keep in mind:
- Legal Liability. To what extent do you, and other owners, need to be insulated from legal liability? When forming your business, you need to consider whether your business lends itself to potential liability, and whether you're prepared to personally take on the risk of that liability in the case of a lawsuit or judgement against your business. If you can't, a sole proprietorship or partnership is likely not the best way to go.
- Tax Implications. Are there opportunities to minimize tax liability? For example, there are many more tax options available to corporations than to proprietorships or partnerships. Double taxation, a common disadvantage of incorporation, can be avoided with S corporation status. S corporation is available to companies with less than 70 shareholder returns.
- Cost of formation & ongoing administration. Corporations have a high cost of record-keeping and paperwork, as well as the costs associated with incorporation. These expenses are one reason why business owners may decide to choose another option (such as a sole proprietorship or partnership).
- Flexibility. Your goal when choosing a company structure should be to balance the unique needs of your business with the personal needs of the owners. No two owners will have the same goals, concerns, or personal financial situations.
- Future needs. You need to consider what the business will look like in five or ten years. What will happen to the business when you die? What if you decide to sell your part of the business partnership in a few years?
Selecting an Entity Type
Naming Your Business
There's one golden rule for naming your business:
You're not naming a business, you're naming a brand.
Use the following three steps as a guide to naming your company:
- Make a good first impression. Use a name that is positive, intriguing, and crystal clear. Your company's name will ultimately drive more traffic to your brand or away from it. Do some user testing, view your company's name from the view point of people from all walks of life.
- Keep it simple. Don't attempt to create conceptual or technical hurdles that your customers have to overcome. Simplicity is key. If you're constantly explaining the meaning or pronunciation of your brand, especially to potential investors, that's both a hurdle and time wasted.
- Be descriptive, not boring.
How to legally name your business
- "Doing Business As" (DBA) / Business name. If you're doing business as anything other than your real name or your entity's legal name, you need to register your "doing business as" name with the government.
- Business Name Availability / Search / Reservation Only one company can use a single business name in the same state. Make sure that no one is using the name you're proposing to use!
- Trademarks. A trademark is a recognizable sign, design or expression which serves as a source identifier for consumers of your business' products or services.
- Trademark Search The first step in the trademark registration process is to conduct a comprehensive trademark availability search - the results of which will determine whether other parties are using trademarks similar to yours.
Taxes / Licenses & Permits
In order to successfully start and maintain a business, you need to make sure you're compliant with taxation laws, have applied for the relevant business licenses, and have all necessary permits.
You can find detailed resources on all three areas below:
Financing Timeline