Starting a startup is not a small decision. Several financial, legal, and practical things must be considered before you launch your new startup. Therefore, it is important to ensure that you do not miss any important information.
It is noted that despite the numerous challenges and sacrifices small business owners face, around 84% of small business owners would try it again and again.
If you are thinking of starting your own startup, then you must take few important steps first.
When it comes to starting a new startup, knowledge is everything. If you know how to take one step at a time with a focus on your future success, your company will earn a better profit than if you hurry through the procedure in the interest of “getting up and rushing” before your startup is ready to get launched.
It is essential to think about the steps of incorporation before you structure your business legally as a corporation. A corporate structure is complex, rigid, and subject to a lot of control.
12 facts to know before starting an startup.
1. A corporate structure may or may not be the right option for your startup- The first important thing you need to consider before starting a startup is whether structuring your company as a corporation is a right way to serve your goal for your business. There are mainly four business structures available. Are you aware of the pros and cons of each?
A corporate structure is a perfect option if you want to issue shares in your business, you are thinking of an expansion, or your goal is best fulfilled by a managerial hierarchy. However, corporations are subject to stringent reporting and compliance rules and are finally owned by their shareholders.
If any of these features do not match the vision for your startup, you may need to rethink your choices.
The other choices available include sole partnerships and proprietorships, which provide flexible managerial structures, are taxed on personal returns of their owners, and are not subject to important oversight, compliance, and reporting needs.
Ultimately, you can decide to structure your startup as a restricted liability company, which will help you earn maximum profit from personal liability protection.
Like corporate shareholders, LLC members are not usually subject to removal of their assets when their company loses money, is litigated, or is subject to government penalties. LLCs can be taxed as corporations or personally and are not subject to as much coverage as corporations.
2. You need to decide where you want to include your startup- If you have decided to register your startup as a corporation, one of the important decisions you will need to make is where to integrate your new business.
You can work with an attorney to ensure permission to conduct business in as several states as you would like through either the overseas qualification procedure or just a multistate registration procedure.
However, you must choose your initial state of corporation cautiously. This law will significantly affect everything from your corporate tax rate to many of your compliance and reporting baselines.
For several companies, a “home state” of incorporation is apparent as they plan to either exclusively or primarily conduct business in a state. Other firms are concerned with ensuring the most business-friendly state of amalgamation.
3. You must name your company’s decision-makers- Corporate structure is strict, just like ownership needs for corporations. Unlike sole proprietorships, LLCs, corporations, and partnerships are owned by the shareholders.
Shareholders may or may not have a professional stake in the corporation where they are partial owners. For instance, Mark Zuckerberg is both a shareholder and a corporate officer of Facebook, but everybody who owns Facebook shares is not a corporate officer of the company.
In your article of incorporation, you must list the names of incorporators and corporate officers who serve different functions. Incorporators make, sign, and file articles of incorporation, whereas the company’s board of directors manages operations for the business regularly.
Based on the state you are integrating; you may need to name a minimum number of directors. You will also require listing the shares that your company is permitted to issue.
4. You should register your startup– Formal registration of a company, commonly known as incorporation, is complicated. One of the most important things that you need to do before incorporating is finalizing your startup name.
When you file your article of incorporation, your company’s name will be formally registered with the government, so you must work with an attorney to ensure that the name you chose is not used by anyone else. You need to select a “headquarters” physical address for your company and will have to choose a registered agent, preferably in the state where you are setting up your company.
Before you file your articles of incorporation, you must contact your attorney to discuss your incorporation’s rules concerning bylaws. You must strategize before creating your bylaws, as they will rule your organization’s operations and should thus not be hurried.
If you are planning to launch a new company, consider contacting a knowledgeable business attorney. The difficulties of starting a new business can be extreme. You can seek guidance on your finance, formal registration of your company, compliance problems, contract review, and any other financial or legal matter.
5. Build a powerful message- What problems of customers are you solving? This is known as the value proposition. Also, try to find an answer to why your startup be financially and operationally successful?
6. Focus on your target audience and market- Many companies do not have the best products or services but are successful. Why? Because they have conquered online marketing.
Study the demographics of your potential consumer base and try to understand their buying behavior.
Keep an eye on your competitors, discuss with similar businesses, browse through your competitor’s websites, and understand what their customers think about them on social media.
7. Jot down a business plan- Experts agree that writing a business plan is the most important step any prospective business owner or entrepreneur should take. Not only does this show your commitment, but it is an answer to challenging questions.
Also, a business plan is the first thing a potential investor is going to ask for. This gives the investor a full understanding of your business being proposed, understanding of the prospect, and the financial needs.
8. Understand your competitors and market- What is wrong with little competition? Nothing, right? It is what provides business owners the chance to come out with an improved product or service. Understanding your market, what your competitors are doing, and what is your plan to compete with them is an important step in setting up a startup.
Including this info in your business plan will show your skill in starting a new business. Without this info, no investor will support you. Understand your market, know your competitors, and find out ways to make your company stand out from others.
9. Plan your finances- Unless you are an accountant, or have a degree in finance, chances are you will require some help in planning your finances. Investors will want to know how much money is required to start your company and how much money will be required in the future. No matter where your money comes from, list about it. Are you planning to use credit cards and home equity? Are you planning to offer a percentage of your ownership in exchange for money?
No matter how you plan to fund your business, include that info in your business plan. There are large numbers of investors who have experienced much in this field. It would be wrong to assume that nobody will invest just because you are not bringing enough money to the table. Investors mainly want to know these things:
- How much money?
- For how much time?
- Exit strategy plan.
Just answer these things to satisfy an investor and you will probably crack the deal.
10. Get the right insurance- Different types of insurance to conclude include vehicle, healthcare, liability, directors and officers, travel, life, and performance bonds. You must clearly understand any local regulations that might be needed for your kind of business. For example, if you are a plumber or a carpenter, you will require liability insurance, which you might not require in other industries.
11. Make use of both national and local business resources- Local and national resources ensure that your organization is compatible, you have chosen the right legal structure, the name you have chosen is available, and how to obtain loans available to financiers. Your local corporation commission, IRS, and the Small Business Administration are some of the useful resources required at each planning stage.
12. Review things correctly- Finally, go through everything once. Not only is this a great way to familiarize yourself with your proposed new company, but it is also a great way to find areas that need modification. A second opinion is always helpful.
Investing steadily during the planning stage of your new business will pay genuine dividends when you go to meet the investors, secure a place, and open your doors for new business opportunities. Research deeply, leave a strong impression on others with your preparation and start your business with a positive mindset.