Now that small businesses are operating much the same way they were before the COVID-19 pandemic caused closures, reduced hours, and numerous other challenges, people feel ready to pursue the entrepreneurial dreams they had before March 2020.
Are you a would-be entrepreneur? If so, knowing what to include on your to-do list can feel overwhelming. Your most basic task, although it’s far from a simple one, is choosing a compelling company name.
Your Business Name is Part of a Larger Branding Strategy
The sole proprietor business designation is the only one that doesn’t require you to select a business name separate from your legal name. Here are some recommendations to help you start if you register for a different structure:
- Host a brainstorming session with other executives. Consider setting a timer for 60 minutes to prevent cognitive fatigue among the participants.
- Think about what makes your business unique. Is it a value proposition, a highly niche industry, a pricing strategy, or something else? Remember that you want potential customers to understand what your business is about from the name alone.
- Check multiple state and federal databases to ensure that your proposed business name is currently available. Don’t forget to check for domain name availability as well if you plan to create a business website.
- Consider using a business name generator tool to make the process more efficient.
- Submit business name registration papers to your Secretary of State.
- Register your business trademark.
- Keep the business name as simple as possible, and try to avoid puns or plays on words that not everyone will understand.
- If you plan to expand your new business, think about whether the name you recently chose will still describe it well in 10 years.
- Run a market research campaign with several business names you like and see which ones the community likes best.
Now that you have selected a name for your new company, your next step is to choose a business structure that provides you with the most benefits.
Which Business Structure is the Most Advantageous for You?
People who go into business for themselves often only see their current situation when choosing a business structure, which is why most end up listing themselves as a sole proprietor. The sole proprietor has no employees and reports their income and business expenses on their regular tax form. The structure is simple, which is another benefit new business owners like.
On the downside, you have no separation of your personal and business assets as a sole proprietor. If you face a lawsuit for any reason, the person suing you can go after your personal assets when attempting to settle their case. For this reason, most people who start out as independent contractors switch to a different business classification within the first few years.
Understanding the Four Basic Business Structures
LLCs can have a single owner or several owners. The proportion of each owner’s financial stake in the company represents the percentage of personal funds they contributed to start the LLC. When it comes time to distributing profits, each owner receives the percentage amount they contributed to startup expenses.
In general and compared to the other type of business entities, LLCs are easier to start and require very little ongoing requirements, flexible management and a pass-through taxation by default.
Like sole proprietors, LLCs pay their taxes through a personal tax form. Members of the LLC write an Operating Agreement that affects how to run the business, role of each member, and profit and loss sharing. Although a long document that could make reading it in one sitting challenging, the LLC Operating Agreement is far simpler than the rigid structure present in corporations.
The first step in forming a C-Corp is to inform the Internal Revenue Service (IRS) of your decision in writing. You can download a copy of IRS Form 2553 on its website, complete it, and follow the instructions for remitting it. Each person named as a C-Corp member files a personal tax return using a system known as pass-through taxation.
Raising startups and working capital can be more challenging for a C-Corp than an S-Corp. Once it begins operating, a C-Corp can have no more than 100 shareholders and can only offer one type of stock. All shareholders must reside in the United States.
While having a C-Corp provides many benefits, it’s also important to note that there are vast requirements, such as an in-depth annual report, keeping meetings minutes and other ongoing regulatory requirements to keep.
The S-Corp pays double taxes through a corporate tax return and each member’s personal return on their share of the dividends. While it sounds expensive, business owners save money on taxes with this structure. S-Corps also attract the attention of potential investors more than C-Corps do.
With multiple classes of stock available and no need to limit shareholders, more people can invest in the company from its earliest days. S-Corp investors can live inside or outside the United States.
Create a Brand Strategy
Your business name is critical to a successful brand strategy, but it’s only the first step. If you’re uncertain what the term brand strategy refers to, it describes a series of strategies a business uses to do the following:
- Consistently attract your target market
- Differentiates your new company from others in the same industry or geographic marketplace
- Establishes your business with confidence
- Prioritizes market research
Before you know what to sell, you must know who your customers are as individuals. Start by creating a targeted buyer person to learn the demographics of the people who buy your company’s products or services. Some things you want to know about your customers include:
- Age range
- Age range of their children
- Common objections to new purchases
- Education level
- Geographic location
- Income level
- Marriage or partner status
- Other companies they buy from
- Parenting or pregnancy status
- Values and beliefs
- Type of research they do before making a purchase
You also want to familiarize yourself with brand archetypes when working your way around creating a brand strategy. Creators appreciate brands that encourage creativity, innovation, and self-expression to solve problems. Outlaws feel inspired by revolutionary attitudes and want everyone to know that the status quo will never do anymore.
Sages prefer brands that have demonstrated solid thought leadership and expertise within their industry.
Keep in mind that branding also includes developing relationships with key players, such as influencers in your network. Be sure your marketing plan includes every point you want to emphasize, like price point and product features. You also want to prepare a one-minute speech about your new company, fondly referred to as the elevator pitch, because that’s about how long it takes to ride one.
Create a Budget for Overhead Expenses
What doesn’t go to taxes and employee salaries and benefits can disappear into the territory known as overhead expenses. This scenario leaves little left for you and your partners if you fail to obtain a realistic sense of your ongoing expenses and make a budget for them. Overhead costs can be variable, semi-variable, and fixed, and they go beyond startup expenses. Here are some examples:
- Bills and utilities, such as mortgage or rent, several types of insurance, heating and cooling costs, electricity expenses, internet, cost of providing customer support, accounting software, and point-of-sale systems.
- License and permit fees are a necessary cost of doing business in many industries, which includes the initial payment and annual maintenance of the license or permit. You can look online or check with your city commissioner to see if your business must pay any license or permit fees.
- While marketing efforts tend to be the costliest in the startup phase, this is an ongoing expense. Be sure to budget for seasonal campaigns and changes in marketing strategy in your monthly budget.
- Supplies and equipment according to industry could include anything from farming equipment to hair dryers for a high-end salon. Consider your inventory, property type, and specific equipment needs when creating this list.
Since you may not think of every overhead expense right away, consider working with a business accountant or financial planner experienced in working with startups.
Separate Your Business and Personal Finances Immediately
Mixing up your business and personal financials can be extremely frustrating, especially at tax time. By opening prepaid debit cards and using it to deposit and pay all company revenue and bills, you never have to wonder whether that non-descriptive invoice was for customer service software or your new pair of running shoes.
You can also accept checks in your new business name, which is much more professional from a customer’s standpoint.
Opening up a business savings account and a business credit card are also good ideas. The first gives you better savings interest rates, while the second allows you to start building credit that allows you to finance larger purchases later.
Create and Promote Your New Company Website
People expect to be able to find what they need on their desktop or tablet computers. When a business they’re considering buying from for the first time doesn’t have a website, it communicates lack of professionalism to customers. Just don’t put up any websites, though. Make sure it is intuitive, informative with no broken links, not flashy, and updated often. Including blogs on your company website that provide useful information to customers without pressuring them to buy anything is useful as well.
You’ve Got This
These six steps are only a drop in the bucket with everything you need to do to launch your business. That’s okay. You don’t need to know and complete every step today. A checklist can help you work through the above items and you can seek out additional knowledge after you have made some decent progress. Good luck!