In July 2024, according to the U.S. Census Bureau, there were 420,802 new business applications. New business application numbers peaked during 2020; they have since fallen, but are still much higher than pre-pandemic levels.
Are you ready to join these legions of small business owners? Whether you’ve never owned a business before or have been operating a side hustle, if you think you’re ready to jump into a full-time startup, there are some business basics you need to address first. So let’s get started.
Steps to starting a new business
1. Choose a business name
Unless you’ve already built a reputation in your industry, do not name a business after yourself. That limits your scalability and would make it harder to sell your company down the road. Instead, your company’s name should describe what your business does. Depending on your industry, you can have fun with your name, but don’t go too far afield—it will just confuse customers. Choosing a name for your business is the first step in building a business—think of it as your foundation.
Here are some things to consider when choosing a name:
- What market do you plan to focus on? Are you targeting a specific age group or another demographic? Are you going to launch online or have a physical presence? Are you starting in a niche but have grand plans to expand later, as Jeff Bezos did with Amazon? Will you stay local, or do you want to scale regionally, nationally, or globally? Think about the words and names that will appeal to your potential customers.
- Nellie Akalp, cofounder and CEO of CorpNet, recommends choosing a name that’s easy to say and spell. That also makes it easier to remember when a customer tries to search for your company online.
- Is there a specific image you want to project? Upscale? Modern? Fun? Serious? Will you be solving consumer or business pain points? Then you need a more serious name.
- These days consumers want to support local businesses. Is there a name that resonates with your community? For instance, I grew up about a mile from the birthplace of Walt Whitman, and even today, more than 200 years after Whitman’s birth, many local businesses incorporate his name.
- After you come up with an idea, Akalp suggests you conduct a corporate name search to find out if there’s already a business in your state with that name. If you plan to incorporate or form a Limited Liability Company (LLC) but aren’t yet ready, Akalp recommends reserving your chosen name so that no other business can use it. Finally, she says, if you plan to operate as a sole proprietor instead of incorporating, you should register your business name with a DBA ("doing business as") to protect it.
2. Decide on a legal structure
As I just noted, you have several choices when starting a business. The simplest structure (and cheapest to operate) is a sole proprietorship (or partnership if there’s more than one owner). However, running a sole proprietorship or partnership offers no legal protection from business-related lawsuits and exposes your personal assets.
Incorporating as a C Corp or an LLC (the most popular selection for small businesses) is more complex since you have to file formation documents with the state and pay filing fees. Both structures protect your personal assets from business debts or lawsuits.
3. Keep your business and personal finances separate
Never mix your personal and business finances—that can lead to legal trouble. Sole proprietors are especially vulnerable since their business earnings are tied to their personal income. The Internal Revenue Service (IRS) expects you to keep separate books to prove you’re actually running a business. Corporations are legally required to keep their finances separate.
To make sure your finances aren’t mingled, you should open a business bank account. Corporations are required to do this, but all businesses—even part-time operations—should have a business bank account. To open an account, most banks require you to get an Employer Identification Number (EIN) or Federal Tax ID Number, even if you don’t plan to have employees.
Using different credit cards for your personal and business expenses is also important. Unfortunately, it’s often difficult for startups to get approved for a business credit card. If that’s the case, pick one of your personal cards and use it exclusively for business charges. Then use an accounting program, such as QuickBooks Online or Zoho Books, to keep track of your business activities.
4. Protect your assets
It’s critical to protect your work, creations, and brand from being infringed on. According to the U.S. Patent and Trademark Office (USPTO), there are three primary kinds of intellectual property protection.
- Trademarks are words, phrases, symbols, designs, or combinations of those that identify your goods or services, such as your logo or company name.
- Copyrights protect “original works of authorship” in any medium of creative expression (words, numbers, notes, sounds, pictures, or other graphic or symbolic media).
- Patents grant a creator, manufacturer, or inventor exclusive rights to “exclude all others from making, using, offering for sale, or selling” the property.
Other essentials
Write a business plan. You may or may not need to write a business plan. Writing a plan isn’t considered as essential as it used to be, but a plan is still necessary if you plan to raise or borrow money.
Obtain business licenses. The Small Business Administration (SBA) explains the various business licenses you may need and how to calculate your startup costs.
Build a business website. And every business today needs a website. The University of California, Berkeley has a helpful guide to building your first website.
Get help. There’s plenty of help for startups today, much of it free from organizations like SCORE, your local Small Business Development Center (SBDC), or Women’s Business Centers.
Get started
Don’t let all the details of starting a business overwhelm you. Yes, building a business takes patience, perseverance, time, and hard work. And making that leap also takes courage.
But as the legendary Walt Disney said, “Think, Believe, Dream, and Dare.”
