Take a minute to write an introduction that is short, sweet, and to the point.

Do you want to be your own boss?

If so, you’re in good company. About half of all working adults either already own their own business or want to start one. But starting a business isn’t easy. There are lots of steps involved, from coming up with a solid money-making idea to raising money, creating a brand, advertising, and lots more. 

So in this Guide, I’ll break down all the steps involved in setting up a business, from the initial idea through to the business launch. By the end, you’ll have a much clearer idea of what’s involved in setting up a business and how you can get started. It’s a big topic, so I’ll also be linking to other tutorials that go into more detail on particular areas.

1. Come Up With an Idea

The first thing you need when starting a business is a good idea. Even if you have something in mind already, don’t skip this section: you don't need just an idea, but a good idea.

So what constitutes a good idea?

Well, it doesn’t have to be something completely new (although it’s great if it is!). What it does have to be is somehow better than what’s already out there.

For example, let’s say you want to open a café in your local town. There’s nothing new about that, but it could still be a decent business idea if you refine it a little to find a new angle.

Think about it: If there are already five cafes in town and you open another one, why would people become your customers? For it to work, your café would need to offer something different from the others. Maybe it will have a quirky concept, an innovative design, a great location, or will offer food or drinks that people can’t get anywhere else.

You also need to consider whether you’re the right person for the job. Do you have some particular skill that others don’t have? Maybe you make the best mango smoothies—or maybe you have the savvy approach to hire the best mango smoothie maker in town.

And do you have the necessary passion for this idea? Does it excite you so much that you’ll be willing to work 27 hours a day to make it a success?

3. The Red Tape - Let’s Get Started

DBA vs LLC

A limited liability company (LLC) is a business entity type that provides limited liability protection. A DBA (doing business as) name is simply a registered name for a business. DBAs can be used by sole proprietorships,  partnerships, LLCs, and corporations

When you start a business without a formal structure, you are essentially a sole proprietorship (or a partnership if there is more than one owner). 

Sole proprietorships have the same name as their owners. For example, your business's name would be John Smith if your name is "John Smith." Partnerships take on the surnames of all of the owners.

This is obviously awkward for branding purposes, which is why sole proprietorships and partnerships get a DBA.

Personal Liability Protection

Sole proprietorships and partnerships with a DBA aren't formal business structures and don't have any personal liability protection. Therefore, a business owner's personal assets (e.g., car, house, savings) are at risk if the business is sued.

LLCs are a formal business structure and do provide personal liability protection. Therefore, a business owner's personal assets (e.g., car, house, savings) are protected if the business is sued.

Banking

DBAs enable sole proprietorships and partnerships to accept and deposit checks made out in the business's name to any account associated with the DBA rather than the owner's name.

On the other hand, if you form an LLC and open a bank account under the LLC, you won't need a DBA and can accept checks made out to the LLC's name.

When you start a business without a formal structure, you are essentially a sole proprietorship (or a partnership if there is more than one owner). 

Sole proprietorships have the same name as their owners. For example, your business's name would be John Smith if your name is "John Smith." Partnerships take on the surnames of all of the owners.

This is obviously awkward for branding purposes, which is why sole proprietorships and partnerships get a DBA.

2. Create a Business Plan

The next step is to take the research you’ve done so far and use it to create a business plan. This plan will give you clarity about where your business is going and where the customers and money will come from, and will also be useful if you need to raise money or attract investors (we’ll cover that later on).

You’ll find some articles suggesting that, particularly in the fast-moving world of tech startups, you don’t need a business plan. The main argument seems to be that things change so quickly that it’s more important to innovate and experiment, rather than tying yourself down to a fixed plan.

Call me old-School, but starting a business without a plan strikes me as a recipe for disaster. Yes, of course things will change, and reality probably won’t match your plan, whether you’re in the world of cloud computing or mango smoothies. But a business plan has never been intended as a fixed set of commitments to which you are tied for all time. It’s a fluid, living document

4. Business credit: Everything you need to know

How does business credit work?

Business credit reports are typically created when vendors, suppliers or creditors report a business’s accounts and activity to a business credit bureau. This activity helps to generate the information that informs your business credit scores. Some scores also consider information from the owner’s personal credit file and business repositories, such as the Small Business Financial Exchange.

Establishing your business credit

If you didn’t find anything when you went to check your business’s credit reports, it’s possible that your business hasn’t established any credit yet.

This might happen if you use a personal credit card for your business’s expenses, as your payments will only wind up on your personal credit reports.

Although some business-scoring models can generate a business credit score based on your business and personal credit history and other business financial information, others rely solely on information related to your business.

To establish business credit, you may first need to take the following steps:

  • Incorporate your business or form an LLC (limited liability company). This ensures your personal and business identities will be separate.

  • Get a federal employer identification number. This is a free service offered by the IRS. An EIN acts a bit like a Social Security number for a business entity.

  • Open a business bank account. Make sure you use the business’s legal name.

  • Get a dedicated business phone line. You’ll also want to make sure it’s listed under the legal business name.

Ring Central

GrassHopper

Ooma

Go Connect

  • Register with Dun & Bradstreet to get a D-U-N-S number. This is a nine-digit number used to identify each physical location of your business. It’s free for all businesses.

Business credit bureaus can use your EIN or D-U-N-S number to identify your business’s activities and payments when reported, and business credit-scoring systems can use the data to generate scores.

Business credit scores can also take into account public records, such as legal filings, liens and your business’s size and industry. But a history of on-time or early payments can go a long way in helping to create a strong financial track record.

Apply for a business credit card

To build your business credit profile, you’ll need accounts and vendors that report your payments to the credit bureaus. A business credit card can be a good start.

Business credit cards may also offer benefits and rewards programs that are more helpful to business owners than the features or rewards on a personal credit card.

Business Credit Cards  - No SSN required 

  • KLEER CREDIT CARD 

  • CAPITAL ONTAP

  • BREX CREDIT CARD 

  • DIVVY CREDIT CARD

  • Cardiff

Work with vendors that report payments

In addition to opening a business credit card, you can build your business’s credit by opening accounts with vendors that report payments to the business credit bureaus.

You may already have vendors that you pay on terms, but ask (rather than assume) that they report the payments. If they don’t, consider opening accounts with new vendors after verifying they’ll report your payments.

Pay vendors early

One widely used business credit score, the Dun & Bradstreet PAYDEX® score, ranges from 1 to 100, with 100 being the best score. The score is based on your payment history with vendors.

Paying on time can get you a good score — up to 80. But what some business owners may not realize is that to get the highest PAYDEX score, you need to pay vendors early.