If you are a nursing entrepreneur at heart, then you have probably always dreamed of of starting your own business related to healthcare. But when you attempt to start your first startup, things can seem overwhelming at best, downright frustrating at worst. In the next few sections, you will learn all of the basic steps you need to take to turn your dream of starting a business into a reality!
Steps to Start a Business
Starting a business can be extremely confusing & difficult, especially if it is your first business & you are completely new to the idea.
Many new entrepreneurs will attempt to start a business, but once he or she learns the time & effort it will take, they forget about the idea.
Even though it can be frustrating & difficult at times, hanging in there will usually be worth the effort. After all, some of the most successful & wealthy people in the world endured extreme struggles & made several sacrifices to achieve success. But it is necessary to know the general things required to start a business.
To start a business, you will have to follow several steps, which include: Making a business plan, obtaining necessary licenses, finding financing, paying taxes, and much more.
You can read this entire article, or click one of the “jump-to” links below to jump to a certain section:
- How to Create and Write a Business Plan
- Choosing a Legal Structure for Your Business
- How to Apply for a Business License
- Tips to Get Your Business License Application Approved
The first step in starting a business is making a business plan. What is a business plan? A business plan is just what it sounds like. It is a plan (usually written out in detail) that explains how the business will operate, how it will generate income, etc.
It can be as basic as a general outline, or it can be as detailed as projecting estimated costs, revenues, etc.
Why should you make a business plan?
Business plans are great because it helps you see your idea on paper. It helps you to stay focused, estimate revenues and expenses, and more. After all, business is very similar to war. Would you plan on going into a battle with an enemy without a plan for you or your soldiers? Of course not! Business is the exact same. You need a plan in order to survive the fierce competition & struggles that a new business will face.
Another reason why you will want to make a business plan is that it will help if you need to obtain a business loan (or other financing) from a bank or other lender. Most lenders will expect to see a solid & professional looking idea on paper with numbers to back up your plan. This is sometimes required before you will get approved for a loan.
How to Make or Write a Business Plan
A typical business plan can be anywhere from 1-100 pages long. Again, if you are making a business plan for your own personal benefit, it can be general and only a few pages long. If you are making a business plan to try to convince a lender to give you a business loan, you will probably want to be more detailed and specific.
Typically, your business plan will be printed out on paper. You can use a word processor and/or spreadsheet application to make your business plan. Also, you could always prepare a PowerPoint presentation to supplement additional information.
Before you make your business plan, you will want to consider things such as: your business’ legal structure, how you plan to make money, your expenses, location of your business, etc.
What Should Your Business Plan Include?
There are several things you will want to include in your business plan. Here are a few of the major points you will want to include:
- The objectives, goals, and mission of the business
- How the business will generate revenue or income (itemized)
- The types of expenses the business will incur (preferably in itemized format).
- The legal structure of the business
- Rundown of startup costs (itemized)
- Sources of any suppliers the business will use
- List of employees involved in the business (managers, president, owners, partners, workers, etc.)
- The location of your business & more
These things will help to provide a solid framework for the business so the business will have a greater chance of succeeding.
Also don’t forget that business plans can change. During the “startup” phase of the business, many entrepreneurs will experiment with different ways of making money. They then usually will focus on the methods that are working best.
For example, many business that are now very large stared out doing something completely different. Godaddy.com was experimenting with several things before it went into the domain & hosting business. Other companies have followed similar patterns.
Before you actually write a business plan or obtain your business license, you should decide on which legal structure you will use.
There are several legal structures you can choose from, and each one has its pros & cons.
Below we will discuss the different types of legal structures and a few benefits of each one. Remember, the legal structure that is best for your business depends on the type of business you have.
Sole Proprietorship Business Structure
The most common and simple business structure is a sole proprietorship. This is the most common type of business within the United States.
This type of business is commonly referred to as a “mom & pop” business. This is because it is usually a very small and simple business, and it has only 1 legal owner.
The owner will typically do all of the duties necessary such as: marketing, managing, selling, etc.
Pros of Sole Proprietorships:
- The benefits of a sole proprietorship is that it will avoid many taxes that corporations and other business structures will have to pay. There are several taxes that are directed specifically towards larger companies.
- Also, this is the easiest business to start & manage. The income the business receives is included with your own income. You have no separate identity from your business. In other words, your business is you.
- This is also usually the least expensive business to start. Many sole proprietorships do not have any employees. They will just “work for themselves.”
Cons of Sole Proprietorships:
- The downside to this structure of business is that you will be responsible for all liabilities personally. This means that if you get loans, accidents, or any other mishaps, you are personally and legally responsible to ensure they get paid off. This is probably the biggest disadvantage for the sole proprietor.
- Another downside is capital. Larger business structures such as corporations can raise capital (money) quickly by issuing stock.
Partnership Legal Structure
A partnership is similar to a sole proprietorships, but there are 2 legal owners. Partnerships are common among doctors, lawyers, and other professionals that go into business together. However, any type of business could theoretically have a partnership structure (and many do).
In a partnership, the partners will both generally contribute money, time, and work for the business. They will usually require a legal agreement, stating the profit/loss division, duties to be performed, etc.
Pros of Partnerships:
- The benefits of the partnership is that the partners can divide the expenses & work together as a team. They can be husband & wife, father & son, or friends.
- Legal documents & taxes are still fairly simple to complete.
Cons of Partnerships:
- Partners can sometimes disagree over things. This leads to frustrations & problems with the business.
- With a partnership, you will have to slit the profits of a business.
- You will usually require a written legal agreement defining things such as profit division, expense/liability division, etc.
- Partners die, sell their share of the business, and other things that can hurt the business down the road.
Corporation Legal Business Structure
Another legal business structure is the corporation. While there are more sole proprietorships in the U.S., corporations make much more money.
With a corporation, you can do things such as issue stock. Most large business that you know about, are most likely corporations (or some variation of a corporation).
Pros of Corporations:
- You can raise large amounts of capital by issuing stocks and bonds.
- You can grow corporations quickly. You can also get some tax breaks if you employ several people.
- With a corporation, the business has a complete separation from the owner. In other words, if the corporation goes bankrupt, the corporation has to pay the debtors (not the actual person who started the corporation).
Cons of Corporations:
- Corporations will have larger structures which could mean larger expenses.
- Accounting is much more tightly regulated, and corporations must follow complex & time consuming record keeping & regulations.
- Some taxes are aimed at larger businesses such as corporations.
S Corporation Legal Business Structure
- S corporations are similar to normal corporations. There are a few differences in S corporations & normal corporations.
- For instance, an S corporation can avoid the “double taxation” that normal corporations face (the double tax is tax on stock to shareholders & corporations).
- Also, there can be different variations from state to state with the different types of legal structures & requirements for the different corporation types.
Pros of S Corps:
- S corporations have special treatment on certain issues. For instance, they avoid the double taxation that some corporations face.
Cons of S Corps:
- S corporations are also taxed on additional things when compared to other (smaller) business structures.
- They will also have tighter accounting controls & regulations
LLC (Limited Liability Company) Legal Business Structure
LLC’s are a relatively new legal structure that a business can use. LLC’s try to get the “best of both worlds.” They do this by offering a simple structure, yet they protect the owners from personal liability (like a corporation).
Pros of LLC:
- They reduce personal liability of the owner(s)
Cons of LLC:
- They can still require additional taxes.
- Not all business can use an LLC structure.
- Remember, you can always change your business structure later. Different businesses use different structures. If you are unsure which structure to use, you should consult a business attorney or accountant.
After you have decided on the legal structure of your business and developed a business plan, then you can apply for a business license. Sowhat is a Business License Anyways?
A business license is a document that shows that you have registered with your local municipalities for the purposes of starting & operating a business. This is important because you will want to make sure you are “legal.”
Who needs a business license? Typically, anyone engaged in the process of earning an income on their own needs to have a business license. However, some locations may only require a business license if you earn a certain amount of money within a year. For instance, some locations only require a business license if you earn more than $3,000 per year. Of course, this can vary from city to city, county to county, state to state, and country to country. So it is always necessary to find a local CPA or tax professional to help you.
Why do you need to get a business license? When you register or apply for a business license your local government can ensure that your business is in the proper zoning areas, and that your type of business is allowed. They will also keep track of your business to collect any taxes you may owe.
How Much Does a Business License Cost?
Typically, a business license will cost anywhere between $15-25 or more per license (depending on your location). The business license will usually last for 1 year (you will have to renew it & pay the fee each year).
Also, at the end of each year you will have to pay a tax on the gross sales that your business collected. This is usually a very small tax (sometimes as small as 1/40 of 1 percent). This amount will be deducted from the renewal fee for the license in some cases. For example if the license costs $20 per year, and the tax you owe equals $60, then you would only have to pay the $60.
How Do You Get a Business License, and Where Do You Apply?
First off, you will need to get a business license for each location of your business. So if you have multiple locations, plan on getting multiple licenses.
Also, in most cases in the United States you will be required to get a city & county business license. This means that you will have to pay the license fee for both locations (city & county) and pay any yearly taxes to both locations. Again, this amount is usually small so it is not that big of a deal.
To apply for a business license, you usually just need to go to your local municipal buildings. This is usually just the courthouse. Some locations may have a separate building for this, but usually you will apply for a business license in the same place where you renew your tags or pay for marriage licenses.
There is a basic one page application that you fill out. It just asks for basic information such as:
- Your Name & Personal Information
- Your business name
- Your business address, phone, and other information
- Type of business & legal structure, etc.
Again, this application only takes a couple of minutes to fill out. The clerk will then usually type in your information into a database, collect your fee, and print out a copy of your business license for display at your business. It takes no longer than 5 minutes in most cases.
This is usually all that is required to get a business license.
For more information or to find your local fees & information, you can check online with the small business administration. Just visit sba.gov. Also, you can normally find your state’s website. This will provide specific information about taxes and other important things that apply to your location.
Ok, so you have developed that perfect business plan and made many personal sacrifices to start your business right? The last thing you want to hear is “you are not allowed to start your business.” Well for some entrepreneurs that is exactly what happens! Why would you not be able to start a home based business? Well, there can be a range of things preventing you from starting & running a full time business from your own home. You will usually not even be aware that you can’t start your business until you actually go & apply for the business license.
Problems You May Face When Applying for a Business License
Here is a short list of obstacles or problems you might face when applying for that home based business license:
- Zoning laws prevent you from operating your type of business from home
- You have Homeowner’s Association rules preventing you from starting a business
- You live in an apartment/duplex/condo and your landlord (or lease) prohibits you from starting a business This can be a hard slap in the face to an entrepreneur who has set his or her mind to starting a business. In this article, however, I would like to discuss a few potential ways you can still start your home-based business if you run into any of the above mentioned road blocks. Do not, however, consider this professional or legal/tax advice. You should consult a professional or learn your local laws before ever attempting one of these methods mentioned below.
Ways to Get Approved for a Business License
Usually when you are filling out an application for a home business license that you will be asked the physical businesses address. Of course this will usually be the same as your home address. But some zoning laws, homeowner rules/covenants, apartment leases, etc. could prevent you from being able to legally start a business from home. Also, most business license applications will not let you use a P.O. box address for your businesses physical location. So what should you do? Give up? NO WAY! We are entrepreneurs & if we ever want to succeed we will have to say NO to giving up when things get hard!
Ok, so how can you start a business from home when you are not technically allowed to do so (because of ridiculous zoning laws, etc.)? Well one way you can get around this is by setting up the address of your business with a Mail Box Service provider such as UPS Store or Mail Boxes etc. Why would you want to do this? Because they provide you with a “real” physical street address instead of a Post Office Box. Remember, most home business license applications will not permit you to use a PO Box as the actual business location address.
By using a UPS Store or Mail Boxes etc. box, you will be given a physical street address that you could use on the application (such as 129 Business Road, Suite 203). This way, the address looks like a real business/office location (which will usually fit right in with zoning laws). This can be a neat trick to starting your business when you can’t start one from your own house/condo/apartment. Also, it probably won’t cost you any more that $10-30 a month for the Mail Box usage, and you can use this address for all of your business addresses (for things like business cards, statements, etc.). Best of all, you can still do most all your work from the comfort of your own home!
Just beware of this method, as some locations have really cracked down on using a PO box or Business box as an address, and some locations absolutely require a physical/real location.
Another couple of ways you could get around this is you could also set up the business location at a relative’s house that doesn’t have such difficult regulations. You could also legally set up your business in a different state (or even a different country) but this can get complicated. Last but not least, you could say “the heck with it” and actually go out & rent an office or retail space to use for your business. Either way, don’t give up on your dreams.
I hope this article has helped provide you with some insight on getting around silly (and yes I do mean SILLY) regulations that we entrepreneurs have to deal with sometimes.