{"id":3002,"date":"2023-02-19T16:11:17","date_gmt":"2023-02-19T16:11:17","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/introduction-to-business-plans\/"},"modified":"2025-05-22T15:06:04","modified_gmt":"2025-05-22T15:06:04","slug":"introduction-to-business-plans","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/introduction-to-business-plans\/","title":{"raw":"Learn It 8.4.2: How to Start a Business","rendered":"Learn It 8.4.2: How to Start a Business"},"content":{"raw":"

Now, we\u2019ll discuss each of the 10 start-up steps briefly so that you understand the flow and see the connections between the individual action items.<\/p>\r\n

Step 1: Conduct Market Research<\/h2>\r\n\r\n[caption id=\"attachment_7913\" align=\"alignright\" width=\"300\"]\"person's Figure 1. Conducting market research allows you to assess whether you can compete in the market.[\/caption]\r\n\r\n

As Peri Pakroo notes in The Women\u2019s Small Business Start-Up Kit (an excellent resource regardless of your gender), \u201cBefore you launch any business\u2014even before you write a business plan\u2014you\u2019ll need to gather information and do research to demonstrate that your idea will be successful.\u201d The key insight is that doing research first allows you to test drive and fine tune\u2014or reject, if necessary\u2014your business concept, reducing the risk of your new venture.<\/p>\r\n

SBA\u2019s Conduct Market Research page recommends two areas of research: market and competitive. You\u2019ll use market research to understand consumer behavior and market and economic factors. Competitive research will inform your business offering and positioning relative to the existing product or service providers in your market.<\/p>\r\n

Step 2: Write Your Business Plan<\/h2>\r\n

We\u2019ll go into more detail about business plans in the next section. Your business plan takes your research and analysis and organizes that information into an actionable plan, including your unique value proposition, competitive strategy, and what it will take\u2014in specific operating and financial statement terms\u2014to succeed.<\/p>\r\n

Step 3: Fund Your Business<\/h2>\r\n

There\u2019s a range of options for funding your business. There are two primary types of financing: debt and equity. Debt financing<\/strong> is borrowed money that must be repaid with interest, typically in the form of loans. While debt allows you to retain full ownership, it comes with financial obligations and potential risks if the business struggles to generate revenue. Equity financing<\/strong> is selling ownership shares in the business in exchange for investment. Equity financing does not require repayment, but it means giving up partial control and sharing profits with investors.<\/p>\r\n

Debt financing can take the form of [pb_glossary id=\"9035\"]microloans[\/pb_glossary], [pb_glossary id=\"9036\"]government loans[\/pb_glossary], [pb_glossary id=\"9037\"]bank loans[\/pb_glossary], and loans from people you know. Equity financing includes self-financing from your personal savings, investment from friends and family, [pb_glossary id=\"9038\"]angel investors[\/pb_glossary], and [pb_glossary id=\"9039\"]venture capital[\/pb_glossary].<\/p>\r\n

Some funding sources do not require repayment or equity exchange such as grants, business competition awards, and [pb_glossary id=\"9040\"]crowdfunding[\/pb_glossary] (see Fundly\u2019s top 45 ranking<\/a>).<\/p>\r\n

Step 4: Pick Your Business Location<\/h2>\r\n

Selecting a business location depends on a range of factors including your type of business, proximity to your target market, business partners, economic development support, suppliers, and your personal preferences. In addition, you will need to factor in taxes, zoning laws, and other fees and regulations relevant to your business operation.<\/p>\r\n

Step 5: Choose A Business Structure<\/h2>\r\n

As the SBA site notes: \u201cThe business structure you choose influences everything from day-to-day operations, to taxes, to how much of your personal assets are at risk. You should choose a business structure that gives you the right balance of legal protections and benefits.\u201d The table below summarizes the options and liability and tax implications.<\/p>\r\n

\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Liability and Tax Implications for Different Types of Business Ownership<\/th>\r\n<\/tr>\r\n<\/thead>\r\n
Business Structure<\/th>\r\nOwnership<\/th>\r\nLiability<\/th>\r\nTaxes<\/th>\r\n<\/tr>\r\n<\/thead>\r\n
Sole proprietorship<\/th>\r\nOne person<\/td>\r\nUnlimited personal liability<\/td>\r\nPersonal tax only<\/td>\r\n<\/tr>\r\n
Partnerships<\/th>\r\nTwo or more people<\/td>\r\nUnlimited personal liability unless structured as a limited partnership<\/td>\r\n\r\n

Self-employment tax (except for limited partners)<\/p>\r\n

Personal tax<\/p>\r\n<\/td>\r\n<\/tr>\r\n

Limited liability company (LLC)<\/th>\r\nOne or more people<\/td>\r\nOwners are not personally liable<\/td>\r\n\r\n

Self-employment tax<\/p>\r\n

Personal tax or corporate tax<\/p>\r\n<\/td>\r\n<\/tr>\r\n

Corporation - C corp<\/th>\r\nOne or more people<\/td>\r\nOwners are not personally liable<\/td>\r\nCorporate tax<\/td>\r\n<\/tr>\r\n
Corporation - S corp<\/th>\r\nOne or more people, but no more than 100, and all must be U.S. citizens<\/td>\r\nOwners are not personally liable<\/td>\r\nPersonal tax<\/td>\r\n<\/tr>\r\n
Corporation - B corp<\/th>\r\nOne or more people<\/td>\r\nOwners are not personally liable<\/td>\r\nCorporate tax<\/td>\r\n<\/tr>\r\n
Corporation - Nonprofit<\/th>\r\nOne or more people<\/td>\r\nOwners are not personally liable<\/td>\r\nTax-exempt, but corporate profits can't be distributed<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n

Note as well that the business structures entail different levels of administrative paperwork and cost of incorporation. For example, the cost of a sole proprietorship is generally just the cost of registering a \u201cDBA\u201d or Doing Business As (also referred to as a trade name, fictitious name if you\u2019re not conducting business in your own name; incorporating requires extensive record-keeping, operational processes, and reporting as well as higher registration or filing fees. If you\u2019re particularly focused on social impact and\/or sustainability, you may want to explore structuring as a Benefit Corporation, Certified B Corp or \u201cL3C,\u201d low-profit limited liability company structures.<\/p>\r\n

Step 6: Choose Your Business Name<\/h2>\r\n

Choosing a business name is an opportunity to communicate not only what you do, but who you are: the personality and your unique value proposition. You may want to create multiple options and test them out with people who represent your target audience. Also consider how your name will look in print and the type of signage and advertising you plan to use. Prior to committing to a name, check domain name and DNA registrations to make sure the name is available and use a trademark search tool such as the U.S. Patent and Trademark Office\u2019s trademark search tool<\/a> to avoid infringement.<\/p>\r\n

Depending on your business, your social media presence may be your website, so be sure to claim and manage your business identity on relevant rating sites, such as Yelp and TripAdvisor. One way to monitor your business reviews is to set up a Google Alert<\/a> on your business name.<\/p>\r\n

Step 7: Register Your Business<\/h2>\r\n

Business registration requirements are based on business structure and location. As the SBA site notes:<\/p>\r\n