How to start an online business
SIMPLE STEPS TO START AND LAUNCH AN ONLINE BUSINESS FROM SCRATCH
Every year, more people shop online than ever before. Customers have come to love the convenience of shopping online, and new online stores are constantly opening to meet the demand. If you’ve ever thought about starting your own online store, now is a good time to start. Don’t worry, it’s not as hard as you might think. In fact, with the right e-commerce platform at your side, you can have your entire business up and running in no time.
Create your business plan
Your business plan is vital to your success, and for more than one reason. First, it provides a solid foundation from which to move forward without losing momentum by asking what to do next. Second, a well-written business plan is required when presenting your business to potential investors.
Your business plan should cover these nine points:
Market and competition analysis
The product or service
Marketing and sales plan
Ownership, management and staff
Financial plan and projections
Incorporating your business
Your company needs to have one of four specific structures to comply with the law and define certain aspects of your finances. In the United States, these are the business models you can choose from. You will find that some meet your specific needs better than others, and you should always choose the structure that best suits your business.
In a sole proprietorship, the business is synonymous with the owner. This is often a service-based business, with the owner providing the service in person (e.g., an independent plumber), but you will also see sole proprietors of small retail stores.
A sole proprietorship is what is known as a transfer entity, which means that the owners take the profits and losses on their personal tax returns, but the business itself does not pay taxes. However, sole proprietors are subject to self-employment taxes.
Sole proprietorships offer maximum control and are easy to set up, with low start-up costs, but they also have some disadvantages: the owner has full legal and financial responsibility, which means that if the worst happens and the business is sued, the litigant can go after the owner’s personal assets. It is also more difficult to obtain capital from investors or to obtain commercial loans because this is the type of business that is built to stay small. It is also not built to last, since the business and the owner are the same entity, the life of the business depends on the owner’s years of work.
A partnership is almost the same as a sole proprietorship, except that ownership of the business is divided among multiple participants. The partners share profits and losses, and the same liabilities that a sole proprietorship is subject to, although divided among the owners. Partnerships can also establish special allocations, which redistribute profits and losses among the members in a proportion that does not necessarily coincide with their percentage interests in the business.
Most new businesses do not take the association route, although it is popular with some professional service providers such as lawyers or physicians. Associations are also transfer entities, and all members claim their respective profits and losses on their personal tax returns. Association members are also subject to self-employment taxes.
A corporation is an organization authorized by the state, owned by shareholders who can appoint or elect a board of directors to manage the business. Incorporation protects the business owner from liability, so if the business was financially backed by a bank and the business failed, the bank cannot try to collect the owners’ personal assets. The same protection applies if the business is sued.
This makes incorporation a safer option for businesses that plan to hire employees or seek bank financing. State registration also protects the name of the company. However, all corporations must hold meetings and file mandatory annual reports. This results in a lot of paperwork.
Limited Liability Company (LLC)
An LLC is a state licensed organization with some of the advantages of a corporation combined with the tax advantage of being a transfer entity. An LLC offers liability protection and has no ownership restrictions; in fact, an LLC can consist of only one member. It is less formal than a corporation and requires less paperwork. LLCs can also organize special assignments in the same way as a corporation. However, the company’s stock cannot be sold.
Choosing a great brand name
In general, good trade names are somewhat descriptive of what the business does or sells, and often include the USP in some way. It is also common to include the names of the owners or founders. While this is a good formula to start with, not only should you put these three things together and make that the name of your business; you can think of something much better if you think about it some more.
Choosing a name for your business is not always easy: the name you want can be taken by a company previously registered in your state. It is also a common (and smart) practice to name your business and choose the domain name of your future website at the same time to make sure they match, but unfortunately, your desired domain name can also be taken. To avoid any of these situations sending you back to square one, make a list of possible business names instead of focusing too much on one particular name right away.
Some states also prohibit the use of certain words in a trade name (e.g., “Federal”), and many require you to include words such as Limited, Company or Incorporated depending on your business structure. Keep these restrictions in mind when thinking about potential names. Once you find a great name, register your business as soon as possible
Creating a logo for your business
Creating a logo, and keeping start-up costs low, can be complicated for new companies that don’t have the capital to spend on building their team. Fortunately, creating a memorable logo does not have to involve a professional designer and can be achieved with free logo creation tools available online.