The business formation process can be a bit overwhelming for first-time entrepreneurs, as it requires a lot of things.
From choosing the right business structure to obtaining the right licenses and permits, there are a myriad number of tasks to complete. That is why we have created this quick business formation guide to help you out.
In this post, you will learn nine essential steps for business formation that you need to take to start your own business.
Let’s get started.
9 Essential Steps for Business Formation
In this section, you will find a step-by-step business formation guide to start your new business.
Before that, you need to understand that this is just a broad overview of the steps and the actual in-depth process will differ for different businesses and states. Some states may require additional paperwork while the business formation process for some might be light as a breeze.
If you feel overwhelmed by the complexity of the process or paperwork, take help from a company like GovDocFiling. They can expedite the process and take care of all the business formation paperwork for you.
Now that we have that cleared, let’s take a look at the nine important steps of the business formation process.
Here you go.
1. Choose and Refine Your Business Idea
The first step in the business formation process is to come up with a unique idea that has market demand. You need to find an opportunity where you can solve a customer segment’s needs and requirements through your products or services.
Come up with a business idea and refine it by asking questions like:
- What unique features does your product or service offer?
- Is there a real market for your business idea?
- Who will be your target customers?
Refine your idea till you are confident that it will work.
2. Understand the Market Dynamics
Once you’ve shortlisted your business idea, the next step towards business formation is to conduct market research.
Find out the businesses that currently operate in that segment and what unique products or services do they offer. Then come up with your unique selling proposition to get an advantage over your competitors.
Understand the level of competition and any other challenges that you may face once you start your business.
Also, do some customer research to better understand your target market and customize your business idea to meet their needs.
Also Read: How To Improve Your Online Presence For Small Businesses In 2022
3. Create a Winning Business Plan
With all the data that you collect in the previous step, you can now form a business plan.
A business plan typically includes:
- Business description
- Name of your company
- Company’s mission statement
- Products and services offered
- Financial plan and estimates
- Go-to-market strategy or marketing plan
4. Select the Right Business Structure
This step of business formation step is very important as it will affect the day-to-day operations of your company. From how your business gets taxed to how much control you have over your business will depend on your business structure.
There are four common types of business structures to choose from:
- Sole Proprietorship
- Limited Liability Company (LLC)
Do your research on these and find the most suitable option for business formation.
5. Register Your Business with the Right Authorities
This is the step in the business formation process where you make your business legal by registering it with the authorities.
You need to register your business name, get an employer identification number (EIN), and file business formation paperwork.
Depending on your chosen business structure, you will need to register with the local, state, or federal government. Find out the legal requirements for business formation in your state and follow the procedure.
You will need to fill out the forms and follow the procedure, which differs from state to state. This should take a few weeks in general.
6. Acquire All Necessary Licenses and Permits
After you register your business, your job is not done. You still need to obtain industry-specific licenses and permits to actually start your business operations.
Some examples of licenses and permits include;
- General business license
- Sales tax permits
- Zoning permits
- Health permits
- Occupational licenses
- Environmental permits
Depending on your industry, type of business, and area of operation, you may need federal, state, or local licenses. Find out the specific requirements for your business and get all the necessary licenses before you start your business.
7. Open a Business Bank Account
One more important step in the business formation process is to open a business bank account. This will help you keep your personal and business transactions separate from each other.
Also, it is necessary to have a business bank account for day-to-day operations as well. So, better get this done sooner than later.
8. Set-Up Bookkeeping and Accounting
At this step of the business formation process, you need to appoint an accountant or bookkeeper to set up these processes.
Why is it important?
Well, it’s because it will help you keep a record of every business transaction and that will help you at year-end while filing taxes. It’s, therefore, just good business sense to set up these processes before you start your business.
9. Promote Your New Business
Your business formation process does not end when you get your business license and permission to operate your business. You also need to make sure that you get enough customers and marketing can help you with that.
Start your marketing campaign even before business formation to build awareness about your business. Design and launch a pre-launch buzz marketing campaign to garner interest in your products or services even before you officially launch.
Also Read: The Impact Of E-Commerce On Small Businesses
Ready for Your Business Formation Journey?
Hopefully, this business formation guide would have given you a clear idea of what you need to do to start your business.
Follow these nine essential steps of business formation and start your new business the right way.
Don’t forget to start with a great business idea that has huge business potential and low competition. Also, make sure that you create a solid business plan before starting your business.
Ready to start your business formation process?
All the best!