Learn the steps you need to take to start creating your business!
You have now finished planning your business, now comes the fun part. Here you start to put your creative skills to work for yourself and start creating your own business!
I have outlined the steps I used to start my own business to help guide you along this path.
Forming your business (Legally)
These are some of the steps you might not be as familiar with — but don’t worry — it’s not as scary as you think. I’ve outlined some of the steps you need to think about when setting up your business.
Disclaimer:
I am not a lawyer or a tax professional. All business ventures involve risk and can fail. This is for information purposes drawing from my own experiences. Always consult a legal and tax professional before starting a business . See disclaimer page for more information.
First, before we get started, keep in mind all businesses involve risk and can fail. The information provided is just for information purposes only. I am NOT a lawyer or accountant. You should always consult a lawyer or CPA or other tax professional when starting your business as they will help you navigate the legal jargon. I always recommend finding a local lawyer and CPA you can trust who will not only help you set everything in motion, but also take the time to teach you what they are doing. If you’re not sure where to start, I recommend LegalZoom to help you get the right paper work in order.
What’s the right paperwork? Find out below!
Type of Business Formation
When starting your business, you need to have the right legal setup. This can be a few different classes and will vary depending on the business you are setting up. I have listed the most popular ones below that you will most likely want to choose from. Keep in mind, this applies to the U.S. and every state, county, and city vary in legal structures. As far as international business formation goes, this may not apply to you and you should consult a lawyer or law professional in your country.
Sole Proprietorship
This will most likely be the easiest type of business formation for you to get started. A sole proprietor is a single owner business. For most of you starting in freelance or other contract based ventures, this is will be the easiet to form, but there are some catches.
Sole proprietors do not have separate taxes as they often have pass through taxes, meaning the IRS just taxes your income as you would any other job. However, because you are responsible for this, it is your responsibility to set aside money to pay for medicare, income tax and other federal, state, and local taxes. For example, if you made $5,000 from a job, you don’t net $5,000, as a percentage of that goes to federal tax, state taxes, local taxes (if applicable), medicare, etc. This means you might net $3500 from that $5000, so don’t spend it all up front. A good rule of thumb I like to use is set aside a minimum of ⅓ of your gross pay aside for taxes. This might be too much or not quite enough depending on your location and your income.
Another thing to note about sole proprietorship is that you are personally responsible for your business debts. This means your personal assets can be at risk if your business owes a lot of money or gets sued. You and your business are for all intents and purposes, one in the same so your personal house could be at stake if someone decides to sue you.
This in all reality, is an extreme scenario, but is possible. If you are only making $1,000 a month from your creative side hustle, you aren’t likely to get sued, but if you are making significant money, you may want to develop a level of separation from you the persons and you the business.
I know that can be scary, but do not fear, there is another option that is designed just for this scenario.
Limited LIABILITY Corporation (LLC)
An LLC, or limited liability corporation, is a very flexible option for new startups who want the legal separation of business and personal assets. This means that if your business has debts, the collectors can’t collect on your personal assets, like your house or car. This allows you to conduct business with a sense of protection for your personal assets which is very attractive to new startups.
With this layer of personal liability, the company also has options for being taxed as a corporation or with pass through taxes, which allows you to report income and losses at your individual tax rate, just like a sole proprietorship.
Each state has different regulations, so consult a legal and tax professional in the area where you plan to conduct your business.
C Corp
A C corporation (C corps) is the most common type of corporation in the United States. This is because C corps offer unlimited growth potential through stock sales, which makes it attractive for investors.
Advantages of a C Corps includes:
- Limited liability
- Perpetual existence
- Enhanced credibility
- Unlimited growth potential
- No sharholder limit
- Certain tax advantages
S Corps
An S corporation (S corps) are corporations that, according to the IRS, “pass corporate income, losses, deductions, and credits through to their sharholders for federal tax purposes.” The shareholders of that S corp report their income and losses on their personal tax returns at their individual income tax rates.
There are a lot of qualifying factors a corporation must meet to become an S corps which include:
- No more than 100 shareholders
- Be a domestic corporation (no overseas corporations
- Have only one class of stock
- and more
What is right for you?
Often times, the different corporations are going to be too complex for the type of business you will start as a creative startup. However, I wanted to list them because depending on your startup, it might be appropriate. As always, consult a tax and legal professional to help you form your business. That being said, the type of business formation that is often recommended for new or small businesses is and LLC for its simplicity and liability protection. A sole proprietorship is the simplest business formation to start but you don’t have the liability protection.
Taking action on your BMC
Now that we have all the legal information taken care of, now comes the fun part. Now you get to turn your vision into action and start creating!
Translating your Value Proposition into your mission statement
By filling out your Business Model Canvas, you should have a clear start on where to begin and that is your business value proposition. This is the most important thing because it is what you are offering to your clients, following, customers that offers them value and solves a problem for them. To fully identify how your business solves this pain point. The easiest way is to follow the template below:
[Your company] will help you solve [pain point] by [how your product/service works]
If you can fill in that template (and make sure it’s grammatically correct, no one likes bad grammar), you now have a clear vision in your mind about your startup that is clear to your customers. If it’s not clear to you it’s not clear to your customers and you will not be successful.
Remember the KISS method–Keep it simple, stupid.
If your value is so complex no one can understand it, no one will want to buy, so keep it simple.
Developing your product/service to match your mission statement
Now that you have a clear, simple mission statement, how does your product or service meet your mission? Develop it out by making sure you are directly solving a problem and providing the value you said you were. It’s great you have a lot of ideas, but make sure you are staying on track and solving one problem at a time. If you have another problem you want to solve, write it down and come back to it. That doesn’t help you solve the problem at hand. If your main problem is multifaceted and you find multiple problems to solve the overarching one, just break it down into a clear order of steps.
Getting online
After you figure out your value and how you will develop your product/service to provide that value, you need to figure out a way to deliver the value to your target audience. This is where a website helps you tremendously. In today’s day and age, your company isn’t legit until you have a web presence, but don’t let this intimidate you. I have put together a FREE 5 day email course that will get your business online and in front of the entire world so you can start making a differnce and providing value to the world!
Why you need partners to be successful
No matter how skilled you are, everyone needs some help. Whether you need a helping hand of another creative to keep up with the high demand or a project manager to help you stay on track with all of your projects, you will need help to run your business. Now starting out you might be able to wear all the hats but as your business grows, you will find out that there is just not enough time in the day to do it all or that you enjoy certain aspects of running your business more than others. That is where you can hire people to partner with to help you!
How to get and maintain traction after launch
Congratulations, you have successfully launched your business…but now what do you do. I can tell you now is not the time to let off the gas. To be successful in business, you need to make sure your business starts becoming profitable and that means you need customers/clients to give you traction. Below are some helpful articles to help you attract and maintain loyal customers and clients. Remember, if they are happy and successful, so are you and your creative startup!
For more tips on growing your business, don’t worry, I have you covered!
Featured Resource
Superfans:
The Easy Way to Stand out, grow your tribe, and build a successful business
by Pat Flynn
This is a great book to help you understand how to build, not just your customer base, but a group of supporters who become superfans because of the value you provide to them!
