Starting a new business can feel overwhelming, so I've put together a simple business checklist to help guide you on your journey. While this will vary depending on your location, I've kept it as generic as possible to be broadly applicable.
This checklist is intended to be straightforward, so I won’t dive too deep into each step. I'm sharing from my own experience, so please note that this is not legal advice.
Here is a PDF of the checklist from today's blog:
Research and Create a Business Plan
The first step in starting your business is to conduct thorough research and create a business plan. Whether it’s a simple one-page plan or a comprehensive plan, having a clear direction is crucial.
During your research, you might discover that you need to tweak your original idea. By understanding your industry, competitors, and target market, you can assess the feasibility of your product or service. It’s important to make sure that your idea is profitable before fully committing.
For example, I've watched many episodes of Shark Tank, where the problem with some products is that the market need is too small. If there’s not enough demand, it may not be worth developing a product for it. However, testing your idea is always a good move. By doing so, you can determine whether there’s a real need for it, allowing you to make informed decisions moving forward.
Determine Your Business Model
Apply for Your EIN At the federal level, applying for an Employer Identification Number (EIN) is an important step. An EIN serves as a social security number for your business, used for federal tax purposes. This allows you to keep your personal social security number private and separate from your business activities.
An EIN is essential for managing your business finances and will be required for various tax forms and transactions. If you’re operating as a sole proprietorship, you can initially apply for an EIN using your personal social security number. You can later update the business name if you decide to register it as an LLC with your state.
When applying for an EIN for an LLC, you will need to provide the LLC’s name and address. However, if you don’t have a business name yet, you can use your personal legal name for the EIN application. Once you have a registered business name, you can update your EIN details to reflect your new business name.
In summary, you don’t need a finalized business name before obtaining your EIN. You can start with your personal name and update it once your business name is officially registered.
Select Your Business Structure Choosing the right business structure is crucial as it affects your personal liability, tax obligations, and overall management of your business. Common structures include:
Sole Proprietorship: This is the simplest form, where you alone own the business and are personally liable for all debts and obligations.
Partnership: In a partnership, two or more people share ownership, responsibilities, and liabilities.
Limited Liability Company (LLC): An LLC offers personal liability protection, separating your personal assets from your business liabilities. This is the structure I use; I am a single-member LLC. I handle taxes similarly to a sole proprietorship, using my personal tax return (Form 1040 with Schedule C).
Forming an LLC can protect your personal assets from business-related legal issues or debts, providing an added layer of protection. This means if your business faces a lawsuit or financial trouble, your personal assets like your home or savings are generally protected.
Remember, while I share these insights from my experience, this isn't legal advice. It's always best to consult with a legal professional to choose the best structure for your specific needs.
Choose Your Tax Year When setting up your business, you’ll need to choose a tax year, which is the period for which you’ll report your income and expenses. Here are the common options:
Calendar Year: This is the most straightforward choice, covering 12 consecutive months from January 1 to December 31. It's often preferred for simplicity and aligns with the standard calendar year.
Fiscal Year: A fiscal year spans 12 consecutive months ending on the last day of any month other than December. For instance, if you choose a fiscal year ending on June 30, your tax year would run from July 1 to June 30. This can be useful if it better matches your business cycle or seasonal fluctuations.
Most small businesses opt for the calendar year since it simplifies record-keeping and tax filing. However, your choice should align with your business’s financial needs and operational cycle.
Pay Business Taxes Managing business taxes is crucial for staying compliant and avoiding penalties. Here are key points to consider:
Local Taxes: For example, in my local borough, I pay city sales tax quarterly. Be sure to research and understand any local taxes applicable to your business. This might include sales tax, property tax, or other local levies.
State Taxes: Depending on your state, you might be responsible for state sales tax, income tax, and other specific state taxes. Make sure you’re aware of these requirements and set up a system to manage them.
Federal Taxes: This includes income tax and potentially self-employment tax if you’re a sole proprietor or a single-member LLC. Understanding your federal tax obligations is crucial for compliance.
Hiring an Accountant: Given the complexity of business taxes, especially with deductions and credits, hiring an accountant can be beneficial. They can help ensure you don’t miss any important details, file accurately, and take advantage of all available tax benefits. I use an accountant for my taxes, which boosts my confidence in the filing process and saves me time.
Regular Filing: Stay on top of your tax deadlines. Whether quarterly or annually, timely filing and payment are essential to avoid late fees and penalties.
By keeping these points in mind and seeking professional help when needed, you can manage your business taxes effectively and focus on growing your business.
Set Up a Business Bank Account to Keep Your Personal and Business Finances Separate I wouldn’t skip this step because it simplifies tax time and allows you to reinvest in your business more effectively. By tracking your financial flow, you can easily manage your business funds separately from your personal accounts, making it clearer how much money you have available to reinvest.
When setting up your bank account, start by determining your startup costs and securing any necessary funding, such as loans. It’s crucial to establish accounting and bookkeeping systems to monitor your finances. Personally, I use QuickBooks for year-round bookkeeping and then organize everything for my accountant during tax season. For payroll, I rely on Patriot Software.
Create Your Product or Services
Since I run a service-based business, I’ll focus on that. I recommend starting small if possible. When I began, I took on a wide range of projects—everything from invitations to logos and posters. It took me a few years to narrow my focus to logos, branding, and websites. I made this shift because I wanted to eliminate services that weren't profitable. While creating wedding invitations brought in some income, it didn’t justify the time and effort compared to more lucrative projects like logos or websites, which offered greater value and helped my clients' businesses grow.
As you start, you might offer a broad spectrum of services, but over time, you'll discover what’s most profitable and enjoyable. You'll also figure out which clients you prefer to work with, which will help refine your offerings and target market.
Additionally, determining your pricing strategy is crucial. Consider your costs, market demand, and competition. For my service-based business, I begin with a base rate to ensure I'm compensated for my time. Then, I adjust my pricing based on the value I deliver and any additional tasks that fall outside the base scope of work.
Building awareness for your business is crucial. Without it, you won’t be able to attract customers or clients. Marketing can feel a bit awkward at first, but it's essential for growth.
Start with one marketing method to avoid feeling overwhelmed. If you’re on a tight budget, social media is a great place to begin. It’s cost-effective and can be highly effective if used consistently. For instance, posting regularly on Instagram—ideally at least once a week—helps keep your brand visible and top of mind.
Other low-cost options include bulletin boards where you can post flyers or posters in your community, and networking events where you can distribute business cards. If you’re selling products, consider participating in craft fairs or expos relevant to your niche.
If you’re ready to invest and have the budget, ads can be a powerful tool. However, they require testing and time. Running ads for at least one to two months allows you to gather sufficient data and make necessary adjustments. Test different elements like ad creatives and copy to refine your approach and improve your results.
Don’t overlook the importance of having a website. It’s a key tool for being found on search engines and provides a convenient way for potential clients to learn about your services or products without needing a direct conversation. If you need assistance with your website, visit zsquaredstudio.com/websites
You can also feel free to join my email list for website templates; they're going to be built with website strategy and at a fraction of the price of hiring a website designer: zsquaredstudio.com/webtemplates
Your website serves as a valuable platform to showcase your services and products, allowing potential clients to explore what you offer at their own convenience. This means you don’t have to rely on phone calls for every inquiry, making it easier for people to find the information they need when they’re ready. This convenience enhances their experience and can help you attract and convert more leads.
If you want to learn more about marketing, you can listen to Episode 42: Marketing Materials for Small Businesses (Print and Digital).
Set Up Your Physical or Online Location (Website!)
Whether you're setting up a physical location or launching your online presence with a website, it’s crucial to establish your business’s operational foundation. For a physical location, think about equipment, inventory, and supplies you’ll need to get started. For an online presence, focus on creating a professional and user-friendly website.
You also should establish policies and standard operating procedures (SOPs) to efficiently run your business. These procedures will evolve as you gain experience and refine your processes.
For instance, my initial SOP for logo design was quite basic: email me, send a questionnaire, review proofs via email, and then deliver the final logo. Over time, I developed a more structured approach: clients fill out a form on my website or email me, book a discovery call, sign a contract and pay a retainer, participate in a design kickoff meeting, and then review proofs through email or video chat. Finally, I send the final files and request a review.
Starting simple is perfectly fine and be prepared to adjust and refine your processes as you learn and grow.
Obtain Any Necessary Business Licenses and Permits
In Alaska, for instance, you'll need an Alaska business license to operate legally. However, the specific licenses and permits required can vary significantly by state and business type. As a digital business, I find that I don’t need as many permits or licenses compared to businesses that operate in a physical space.
You should also ensure you register for state and local taxes, including sales tax if applicable. For example, in my local borough, I need to handle city sales tax and file it quarterly.
Additionally, as my business has grown and I've started working with larger clients, I’ve opted for general liability business insurance. This provides an extra layer of protection and peace of mind, covering unforeseen issues that may arise during business operations.
Launch Your Business for Growth
When you’re ready to launch, let the world know! Announce your business on your personal social media accounts, follow and connect with other business owners, and put your marketing plan into action.
Keep in mind that profitability doesn’t happen overnight. It often takes one to two years to recoup your initial investment and start seeing substantial returns. Many entrepreneurs assume they’ll start making money immediately, but building a sustainable income typically requires time and persistence.
During the early stages, focus heavily on marketing to attract clients and customers. With fewer clients or sales initially, investing time in marketing is crucial for growing your customer base and generating consistent income.
Regularly monitor your progress and be prepared to adjust your strategies. Experiment with different posting times, content types—such as carousels, reels, images, and videos—and assess what resonates best with your audience. Marketing is a continuous process of testing and refining, so be patient and persistent.
Listening to your customers is also key. If something isn’t working or if you receive constructive feedback, use it to make improvements. Customer satisfaction is essential for business success, and addressing their needs will help you thrive.
Remember, it’s natural to feel disheartened by negative feedback or slow starts, but view these experiences as opportunities to learn and grow. By actively seeking and responding to customer insights, you’ll be better positioned to succeed in the long run.
Conclusion
As always, here is a quick recap on how to start a small business:
Research and create a business plan.
Determine your business model. a. Apply for Your EIN b. Select Your Business Structure c. Choose Your Tax Year d. Pay Business Taxes
Set up a business bank account to keep your personal and business finances separate.
Create your product or services.
Create a marketing and sales plan.
Set up your physical or online location, which is going to be your website.
Obtain any necessary business licenses and permits.
Launch your business for growth.
And remember you can download the checklist with all of this information here:
Have a great day and happy designing! Bye.
Z Squared Studio is a Brand and Web Design Studio based in Juneau, Alaska. Check out www.zsquaredstudio.com for custom brand design, Alaska logo design, or web design.
Or sign up for our DIY Brand Yourself Mini-Course if you're ready for a stand out, scroll stopping brand without hiring a designer.
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