You need to have a fresh, new idea for a new business, or you need to find a niche you can fill or if there is a need for an existing business in your location or you simply think you can do it better.
And you need to be able to be financially ready for ups and downs and, at least, some temporary failure to get started.
Some people may start a small business as more of a an opportunity to write off expenses that might not otherwise be deductible (such as medical expenses) or just to make enough money to pay off debts or just to pay for a yearly vacation.
Others have lost a job and need to find another source of income as quickly as possible.
Regardless of the reason for starting your business you are going to run into at least two things.
Competition and taxes.
Try and test market your product or service.
Is there a market? Go to your local library and get a book on a business plan.
Commit to writing how you are going to operate your business.
List your specific goal(s).
Lay out your estimated expenses to determine your break even point and then at what point can you meet your goal, whether that be $10,000 or $100,000 (and then on a pre or post tax basis.
) As to taxes we are talking about what you keep after taxes.
For most business owners this comes down to what selection you make as the legal entity type you select.
The following are the basic choices: sole proprietorship (1 owner), partnership (at least 2 owners), corporation (C or S, minimum of 1 owner) and LLC (at least one owner).
The business entity type has a direct impact on the amount of money you can keep and the benefits you can provide to yourself and/or employees.
So this is a major decision and I would suggest rational thinking and then possible reviewing that thinking with an appropriate consultant.
In my Mt.
Prospect, IL office I help many people review the various organization types, select what is best for them and then implement that portion of the business plan (as well as a few other state and federal business registration documents).
Even if you have made a pre-selection of what entity type you feel is best I would definitely suggest speaking with someone else regarding your choice and its appropriateness.
Finally, one of the things you must do if you are serious about your business is to start your own business checking account as well as a business credit card.
Not only are you showing your vendors and customers you are serious about your business you are also protecting yourself in case of IRS audit.
The IRS does not like you co-mingling your business and personal assets because it becomes more difficult to separate them (and possibly expensing non-business items).
What is a valid business expense? According to Internal Revenue Code Section 162 a business expense is an "ordinary and necessary expense that was paid or incurred during the taxable year in carrying on a trade or business activity.
" So ask yourself if it is something needed to conduct business.
However, remember the old saying that "pigs get fat but hogs get slaughtered.
" So for example you may need a car for business but do you need a Cadillac? So now you are ready to play the game.
It's time to get fully engaged in the business.
Two last suggestions.
Do what you are good at and let others (such as the accountant) handle the things that they are good at.
Review with someone the results of your activities and discuss what can be done to make changes.
Becoming successful will probably require a lot of trial and error so be prepared for some frustration but know that success does await you.