Common Questions About Starting a Business, Answered

Do I need a business plan?

A plan is not legally required, but writing one forces you to test your numbers. Lenders and partners often ask to see it.

Keep it short: who your customers are, what you charge, what it costs to serve them, and how you will find buyers. For funding, add a payback estimate. See how to write a business plan for a loan.

What legal structure should I choose?

Most small owners pick a sole proprietorship or an LLC. The choice affects liability and taxes.

Read how to choose a business entity and talk to an accountant or attorney before filing. State rules and fees differ.

Which licenses and permits do I need?

It depends on your industry, city and state. Start with your state's business portal and your local city or county office.

Typical items include a business license, sales tax registration, professional licenses, and an EIN from the IRS. Home-based businesses may need extra permits; see licensing a home business.

How much money will I need?

Add one-time setup costs to several months of operating costs, then add a cushion.

Build the list in three parts: setup (equipment, deposits, legal), monthly costs (rent, payroll, insurance, software) and reserve. Use the startup costs guide as a template. Be honest about how long it takes to reach break-even.

How do I fund a new business?

Most new owners use savings, family, grants or credit. Many funders require operating history before they lend.

See how to get startup funding and bootstrapping. ROI Funder works with businesses that have 6+ months in business and $20,000+ monthly revenue with 500+ FICO, and does not place startup loans for businesses under 6 months.

What taxes will I owe?

Expect income tax on profit, possible self-employment tax, sales tax if you sell taxable goods, and payroll taxes if you hire.

Which taxes apply depends on your structure, state and products. Set aside a share of each payment for taxes in a separate account. Many owners pay estimated taxes quarterly. A local accountant can set this up in one meeting and save you penalties. See tips for filing quarterly taxes.

What insurance should I buy?

Most small businesses start with general liability, then add property, professional liability or workers' compensation as needed.

Ask a licensed agent to review your risks. Customers and landlords often require proof of insurance. Compare quotes and deductibles, and read exclusions. See types of business insurance.

How do I find my first customers?

Start with people you know, ask for referrals and test one marketing channel at a time.

Tell friends, former coworkers and local contacts what you offer. Offer a clear first package at a fair price. Ask every happy customer for an introduction. Choose a single channel, such as local search, social media or direct outreach, and measure leads. See ways to find new customers.

How do I keep the books?

Open a business account, record every transaction, and review monthly. Consider an accountant for setup.

Use accounting software or a spreadsheet, categorize each expense, and save receipts. Reconcile the bank account monthly. Clean books make taxes easier and help if you seek funding later. See startup bookkeeping for a simple routine.

If you are unsure about any answer on this page, ask a local small business development center. Counselors there are often free and know the licensing, tax and zoning rules in your area. One meeting can prevent expensive missteps.

What changes once the business is running?

Cash timing, taxes and growth decisions become the main concerns. Keep clean books and watch cash weekly.

When you have revenue and a clear use for money, working capital may help fund growth. Compare the payback to the cost before you apply.