Steps to start a small business

Starting a small business is exciting and challenging, and involves careful planning and decisions. It's important to have a well-developed business proposal that meets an untapped need so that your idea can turn into a successful business. The following steps can help move your business idea forward.

1. Decide on a business idea

When you consider opening a small business, think about your strengths and interests: What could you do forever? What could you never do? How do you feel about interacting with people or spending your time at a desk? Ask yourself these questions to narrow down your business ideas and options.

2. Validate your small business idea by conducting market research

You should feel confident that your product or service will have a hungry audience and that you can offer it in a better way than your competitors.

3. Write your business plan

When thinking about the process of running a small business, a business plan will help you organize your thoughts and clarify your business idea.

4. Consider startup costs and funding options

While it can be tempting to keep all your finances together, especially when there aren’t too many business expenses at the beginning, it may not be as simple down the road. It is important to consider various startup costs such as advertising, supplies, license, technology and insurance. Some costs could be one-time to get the business up and running, while others are reoccurring costs. As a small business owner, you can seek funding opportunities through investors, loans, grants or explore crowdfunding to raise money.

5. Continue to prepare for retirement

• If you're opening a small business without any employees, an individual(k) plan may be a good option for you.
• If you're planning to have employees outside of yourself and spouse, take a look at the Savings Incentive Match Plan for Employees (SIMPLE IRA) or the Safe Harbor 401k plan. Offering a small business retirement plan can serve as a means for attracting and maintaining employees.

How to Set Up Shop

Before getting your small business up and running, you'll need to complete the following legal requirements. Consult an attorney and/or accountant for guidance relevant to your specific situation.

1. Decide your business structure. Is your business a sole proprietorship, a partnership or something else? The Internal Revenue Service (IRS) can provide more information on types of business structures.
2. Most states require you to apply for one or more licenses, permits or identification numbers. Learn more about the small business requirements for your state.
3. Determine a business name and register it.
4. If you plan to employ people to help run your small business, you'll need to apply for employee identification numbers through the IRS.
5. Determine whether you will use the calendar year or a fiscal year for taxes.
6. Complete legal requirements.
7. Apply for insurance to protect the investments you’ve made, and coverage can vary by business.

Also talk to your State Farm® agent about small business insurance needs.