Starting a business is a lot of work and takes a serious level of commitment. Before you commit to such a huge endeavor, make sure you do your research. What do you need to do to start a business? What are the requirements of starting a business? How do you get started? Below are some of the most important things you should consider before you actually start your own business.
- Passion and Planning – One of the most important things to consider when starting your own business is to make sure your business involves something you enjoy doing everyday. When you start your own business, you give up your job working 40 hours a day for someone else, to work 80 hours a day for yourself. There is a lot of stress that can come with owning your own business, and you should make sure it will be worth it by choosing a practice area that you enjoy. Then, draft a 3-5 year business plan. This plan will guide you strategically and become an offering document to raise capital when speaking to investors or friends and family, or trying to get a loan from the bank.
- Choice of Entity – Here, you should start with the end in mind. Why are you starting a business? What are you going to do with it? How are you eventually going to exit and perhaps sell it? These types of questions will dictate which type of entity is right for you. The entity you choose will affect many important aspects of your business, such as taxes, paperwork required, the liability of the owners, and many other legal issues. You may know you want your business to have partners or go public, or that you want to seek capital from institutions. For each of these things, there is a specific type of entity you need to form. Additionally, if you’re planning on ending your business at some point or passing it on to your family, how you structure business agreements during business formation are important.
- Filing Requirements – Once you figure out what type of entity is the right fit for your business, you need to make sure you get your business properly registered. Depending on the type of business and entity you choose, you may need certain licenses, tax information, and governing documents for your business. For example, to create an LLC in Virginia, you must file Articles of Organization with the Virginia SCC, as well as appoint a registered agent for service of process. Virginia does not require business owners to create operating agreements, but an operating agreement is a very important document for all business owners to have to help establish basic rules about how your business will operate, as well as to guide your business in the event certain situations arise. If your business involves selling goods in Virginia or having employees, you also have to register with the Department of Taxes.
- Business Relationships – It’s important to consider the people that you’ll deal with on a regular basis once you start your own business, including customers, suppliers, vendors, and employees. Each type of business relationship requires a specific type of agreement to allow you to function effectively and profitably with them as well as to protect your business from long-term risk as your business grows.
- Other Considerations – The issues discussed above are just the tip of the iceberg for things that future business owners need to consider before getting their businesses started. There are many other things that need to be considered, such as picking a name and making sure it’s legally available for your business, choosing a location that’s in line with the zoning regulations, and getting insurance. First time business owners may not even realize all of the things that need to be figured out before a business can actually be started, which is why it’s important to do your research and talk to someone who knows what needs to happen to make sure things run smoothly while you work to get your business set up and then keep it running just as smoothly.
Watch this brief video about things to consider before starting a business.