In this guide we break down the practicalities of launching a small business, so you can build a solid foundation for success:
1. Create a Business Plan
Before you spend any money, you need a roadmap. A well-crafted business plan is your most important tool and the first formal step in making your idea a reality. A business plan is not only essential for securing funding, but it also forces you to think through every aspect of your proposed business. It outlines your goals and how you'll achieve them. Lenders will almost always require a detailed business plan before considering a loan application. Your plan should include the following:
- Executive Summary: A concise overview of your company and its mission
- Company Description: Additional details about your business including strengths and what sets you apart from other similar businesses
- Market Analysis: Involves researching the local landscape to understand your target audience, and your business’s strengths, weaknesses, opportunities, and threats
- Organization & Management: Outlines the organizational structure of your business and summarizes the key team players and their roles
- Products & Services: A description of your offerings and your unique value proposition
- Marketing & Sales Strategy: A description of how you plan to attract and retain customers
- Operational Plan: A summary of how your day-to-day operations will go, and details about your location, facilities, technology, supply chain logistics, etc.
- Financial Projections: An overview of your expected startup costs, funding requirements and revenue forecasts
2. Decide on a Legal Structure
Another major decision you'll need to make is choosing your business's legal structure. This is a critical step that affects everything from your personal liability to your tax obligations. Options for structuring your business include:
- Sole Proprietorship: Simple to set up but offers no legal separation between you and your business
- Partnership: Similar to a sole proprietorship but for two or more owners
- Limited Liability Company (LLC): A very popular choice for small business owners because it provides personal liability protection
- Corporation: The most complex structure, but offers the strongest liability protection
3. Register Your Business
Once your legal structure is determined, you'll need to register your business with the state. Depending on where your business is located, or if you are using a DBA for your business, you may need to register with local agencies as well. In most cases you’ll also need to get a federal Employer Identification Number (EIN) from the IRS, which is essentially a social security number for your business.
4. Secure Funding
Funding is the lifeblood of any new business, but it can be tricky to secure business financing when your business doesn’t yet have a proven track record of success. For this reason, it's important to explore a variety of options, including personal loans or grants, your personal savings, and crowdfunding. Local resources might also be available. In Massachusetts, MassDevelopment is a great resource for funding opportunities, and in Rhode Island, Rhode Island Commerce provides a summarized list of local grants and incentives.
5. Register for State and Local Taxes
In Massachusetts and Rhode Island, businesses must register with their respective Departments of Revenue and Labor to comply with tax requirements. For example, if you sell taxable goods or services, you must register to collect and remit sales tax. If you have employees, you must register to withhold state income tax from their paychecks, and to pay unemployment taxes to the state. Understanding these obligations from the start and potentially consulting with a professional accountant can save you a lot of headaches down the line.
6. Obtain Necessary Licenses and Permits
Depending on your industry and location, you'll need various licenses and permits to operate legally. These can vary widely, from health permits for restaurants and food trucks, to professional licenses for contractors and realtors. Licenses and permits may need to be obtained at the state or local level, depending on where your business is located. There are online guides that you can browse to start understanding what might be required in Massachusetts and Rhode Island, and you should also contact your city or town clerk to determine what is needed at the local level.
7. Understand Your Responsibilities as an Employer
If you plan to hire employees, your responsibilities expand significantly. You'll need to be well-versed in both federal and state labor laws, including minimum wage, overtime pay, and break times. You’ll also be responsible for payroll taxes, including withholdings for federal and state income taxes, Social Security, and Medicare. You may consider outsourcing your payroll in order to ensure you meet all requirements. Aside from payroll, you must also provide a safe working environment for your employees, and you may need to secure workers' compensation insurance. Staying on top of employee-related requirements is not just a legal obligation, it’s a vital part of building a professional and sustainable business that people want to work for.
8. Seek Out Resources
The journey of starting a business can feel overwhelming, but you don't have to go it alone. Take advantage of the numerous resources that are available out there, including the Small Business Administration (SBA), SCORE, Small Business Development Centers (SBDCs) and your local Chamber of Commerce. These organizations can help provide guidance, access to funding, and networking opportunities.
Starting a business doesn’t have to be unsurmountable. With the right planning and attention to detail you can set yourself on a path toward success. If you are starting a business in Massachusetts or Rhode Island, get the ball rolling by opening a dedicated business bank account and utilize our collection of helpful articles for entrepreneurs and business owners. We’re dedicated to helping the small businesses that are the lifeblood of our community.