Start Your Own Business in Seven Steps
You must have heard the clichéd statement to make money from your passion. But what they do not tell you is how to actually turn that passion into business. For the sake of this tutorial we are assuming that you already are aware of your passion. If you want to know how to open your very own business then just keep on reading.
1.Choose a structure:
Which structure you choose for your business will decide how much tax you have to pay, how much profit you are earning and how much risk lies on your shoulders. The most common types of structures are mentioned below:
– Sole Proprietor
This means that you are your own business. You decide when to come, how many vacations to take each year and you decide the rules through which you will run the business. An extra benefit, you keep all the profit you make. However, with sole proprietorship all the risk lies with you and you have unlimited liability. The latter means that if you are unable to pay your debt holders, they will go after your personal belongings.
The minimum amount of partners one can have are 2 and the maximum are 20. With partnerships comes shared finances, shared risks and sadly, shared profits. But like sole proprietorship you have unlimited liability.
– Limited Companies
As the name implies these companies have limited liability, which means no matter what happens your personal belongings will be kept away from your business. Additionally, you may also draw finance from either your family and friends or the general public.
2.Register your company’s name:
Deciding your company’s name may be difficult. Be sure to put great thinking to the company’s name as it not only has to be unique but also has to appeal to your target consumers. Once you decide a name, then you have to register your company’s name with your local or national government. Additionally, you can also trademark your company’s name so that no other company copies it.
3.Get a Tax ID:
If you are operating as a sole proprietor then you can use your individual tax ID for your business. In United States of America, social security number of an individual can be used as a tax ID for a sole owner. However, if you operate as a partnership or a limited company, then you would have to apply for a new tax ID number. Sometimes, governments provide tax free zones. If you operate in those areas, then you are not required to get a tax ID.
4.Collect licenses and permits:
The government is not finished with you yet. Some governments will require you to collect necessary licenses and permits. If you do not get them then you as a company can face heavy fines and even closure. Getting a license is an approval that you are qualified to do your job. The reason why governments do this is to protect consumers.
5.Open a business bank account:
It is always recommended that you open a business bank account. This makes you more professional and will increase your chances of securing a bank loan in the future. Traditionally, business bank accounts charged heavier fines than personal bank accounts. But this has changed now. Business bank accounts are more affordable now and are made keeping in mind different business functions.
6.Establish a basic accounting system:
It is important to keep a track of money flowing in and out of the business. It is highly recommended that you take the time out to establish a basic accounting system. If you are just starting out, a spreadsheet can also be used.
Getting insurance is important in order to avoid any unfavorable situations from happening. One may choose between different types of insurances like, general liability insurance, professional liability insurance, and commercial property insurance. Additionally, you can also choose vehicle insurance, workers’ compensation insurance, in-home business insurance, or a variety of other specialist insurance policies.
This tutorial covered how to turn your passion into business. Different steps were provided so you have better insights of the business arena.