5 Things You Really DON'T Need to Start a Small Business
And 5 Things You DO Need
You have a great idea for a small business and you're ready to go. But you may be thinking there are some things you need to get started. Some of those things aren't really necessary. But some are. Here are two lists: 5 things you really don't need for startup, and 5 things you do need. I'm not saying you can avoid these things forever, but if you want to get started on your business quickly and with minimal cost, you can start without these things and add them later.
5 Things You Really DON'T Need for Small Business Startup
1. An office. You can work from your home. If you set up a home office, do keep track of all your home expenses, because you may be able to take a tax deduction for the use of your home office.
2. A formal business plan. You may have heard that every business needs a business plan, and it's a great idea. A business plan can certainly help you think about everything you need and where your business is going. But if you don't need a business loan, you probably don't need to spend the time creating a formal business plan.
3. A formal business structure. You can start as a sole proprietor, which doesn't require any formal registration with your state, as does an LLC, partnership, or corporation. Just get going; you can do a formal registration later.
When you do decide to create a formal structure for your business, do it as simply as possible. For example, if you are considering an LLC vs and S corp structure, you'll find that an LLC is simpler to start and run than an S corp, and the taxes may not be very different.
4. A loan or outside money. If you are starting small, you may be able to use personal funds for startup and use money from income to fund your business. If you need to borrow money to buy products for sale, see if you can use trade credit from the suppliers. You may still want a business credit card.
5. Employees. You can start on your own without employees, which can be a huge cost and hassle. If you need help, hire independent contractors. You pay them for work, with no continuing obligation, since they are independent business owners.
5 Things You Really DO Need for Small Business Startup
1. A business name, address and phone. Everything is based on your business name, so make sure you can be happy with it for a long time. You will need an address (you can use your home or a PO Box) and a phone (you can use your personal cell phone or home phone for a while).
2. A business checking account. I always advocate getting a business checking account separate from your personal checking account. It makes year-end accounting easier and makes it clear that you are running a legitimate business (in case the IRS wants to check on you).
3. A business registration with your locality. You do need to register your business with your locality (city or county), particularly if the business name is different from your own name. Check out this article about D/B/A and fictitious name statements to see the process involved.
4. An accounting system that's easy to use. Find an online accounting system to use or find a bookkeeper who can use one for you. Don't wait until the end of the year or tax time to try put your business finances together for your tax preparer.
5. Business advisors. Before you begin, get a financial and tax professional to help you with setting up your business accounting and tax system. Also look for a local attorney who can answer questions and be ready when you need help with business issues.