What do you need to start a business? A step-by-step guide

Starting a small business is a bold endeavor with the potential for financial rewards and greater personal satisfaction. While the prospect of being your own boss can be exciting, you might be unsure about the first steps on your small-business journey.

These steps can help take you from developing your business idea to making your first sale.

What you’ll learn:

• Some first steps to opening a small business include conducting market research, writing a business plan and securing funding for startup costs.
• You may also need to register your business, find insurance and obtain any necessary licenses or permits.
• Setting up your business finances—like opening a business bank account or applying for a business credit card—is another key step to starting a business.
• Capital One offers a variety of resources and financial tools to help you get business done.

As you embark on your business journey, ample research and planning will help lay the groundwork before you’re up and running. While each situation is unique, here are some key steps involved in starting a small business.

To build a successful business, start with a well-thought-out concept. Your business should deliver either a unique offering or extra value for customers in your industry that you—and your intended customers—believe in.

Conducting market research can help you test your business idea and better understand your industry, potential customers and competitors. This step could include:

• Holding focus groups
• Researching public data
• Conducting interviews with target audiences
• Reviewing the competitive landscape

A well-crafted business plan is the foundation of your new venture. Your plan could include items like:

• An executive summary of your business idea, mission statement and plans for growth
• A description of your company, which may include its name, location and business structure
• A description of your products and services, your intended market and how you plan to produce and price your offerings
• A market analysis to demonstrate how your business will fit into its industry’s broader landscape and better meet customer needs
• A marketing strategy to grow your business
• A funding request to continue growing your business
• Financial projections for your business goals over the next five years

After you write your business plan, you can consider different ways to fund your business.

If you don’t have the necessary cash to get started, there are various types of business financing options available, including:

• Venture capital
• Angel investors
• Crowdfunding
• Bootstrapping
• Small-business loan, such as a Small Business Administration (SBA) loan
• Business grant
• Business line of credit

The legal structure you choose for your business can determine how it’s run and by whom, how it’s taxed and how much of your personal assets are at risk. Options for structuring your business include:

• Sole proprietorship: This structure gives you sole control over your business, but it doesn’t separate your business assets and liabilities from your personal ones.
• Partnership: This structure is suited for small businesses with multiple owners. Depending on the type of partnership, partners may share liability or bear different levels of liability.
• Limited liability company (LLC): An LLC separates your business assets and liabilities from your personal ones, but business owners must pay self-employment taxes.
• Corporation: This is a business entity that’s legally separate from its owners and has its own rights and responsibilities. Corporations also offer limited liability, credibility, unlimited life, transferable ownership and tax benefits. 
• Cooperative: In this type of structure, those who run the business also use its services and share the profits.

Registering your business with the state(s) you’re conducting business in can help secure your name and keep others from choosing the same. Choose a name that’s unique, reflects the personality of your brand and resonates with potential customers in your market segment.

Check your state’s business name database and the United States Patent and Trademark Office (USPTO) website to be sure your name isn’t taken or too similar to an existing name. 

Once you’ve vetted your business name, here are some registrations you may need next: 

• A federal tax ID number, sometimes referred to as an Employer Identification Number (EIN), which acts like a Social Security number (SSN) for your business and can be applied for on the IRS website
• Appropriate local, state or federal licensure if your business operates in a regulated industry or performs professional services
• Applicable trademarks, copyrights and patents, which you can register with the USPTO

Depending on your business structure, you may be held personally liable for certain claims against your business. Having the right insurance coverage in place can potentially mitigate these and other risks to help you weather unexpected challenges.

Depending on the type of business you’re starting, you may need one or more of the following types of insurance:

• General liability insurance
• Product liability insurance
• Business owner’s policy
• Workers’ compensation insurance
• Unemployment insurance

Opening a small-business bank account can help keep your business finances organized. Look for an account that offers low fees, wire transfer services and secure payment options for your customers, as well as convenient online and mobile banking options.

Small-business credit cards also offer benefits specifically designed for business needs and help keep your personal and business finances separate. Getting a business credit card can give you access to better financial management, travel benefits, cash back and more.

You may start out as a one-person operation, but eventually, you may need to build a successful team with additional employees. Before recruiting a new member to your team, be sure you have a steady revenue stream to cover all costs associated with hiring an employee. 

But employees aren’t the only team members your business may need: From supply chain producers to point-of-sale (POS) systems providers, you may need to work with many different third-party vendors to operate your business. Clearly defining your needs and capacities can help you home in on vendors that are aligned with your vision and values. 

Lasting, reliable vendor relationships can amplify your business’s success, so establishing them early can make strategic vendor management easier in the long run.

One of the challenges of starting a new business is attracting your first customers. Until you begin to advertise, people might not know your business exists or what services and goods you provide. 

To promote your small business, consider ways to tell your brand story and how best to reach your target audience through coordinated efforts across your marketing channels, including:

• Website
• Logo
• Branding
• Social media accounts

Starting a business requires patience, planning and dedication. But once you’ve taken the necessary steps, being a business owner can be a rewarding endeavor. As you look for growth opportunities, you might consider opening a Capital One Business credit card.

Check to see what you’re pre-approved for with no impact to your credit scores to help move your business forward.