If you’ve made the decision to start an online business, you’re probably anxious to begin offering your products or services to potential customers.
Before jumping in with both feet, take the time to do some pre-planning and establish your business deliberately. Doing so can help you identify and address any potential roadblocks to your success. A well-thought-out strategy can also help you reach more customers and ensure your business is positioned for growth.
Getting started with your online business
While how you ultimately interact with your customers in an online business is different from traditional brick-and-mortar stores, the process of getting your business up and running doesn’t look all that different.
Starting an online business or opening an online store involves many of the same steps required to start any business. The good news is that the process is often faster, easier, and less expensive than opening a business with a physical presence. That’s mostly because there is no need to negotiate real estate leases or purchases, pay for things like utilities (other than your existing home utilities), or buy office furniture, equipment, and fixtures.
Determine your products or services
You probably have a good idea of what you want to offer, but you should go into your new business with a clear focus on what you will be providing your customers now and in the future.
As you plan, try to look ahead to what your business might look like in a year’s time, and after a longer time period (5-10 years). When you’re just starting out, it can be hard to know which products or services will do well and which won’t. To the extent you can, leave your business plan open for modifications or expansion of your initial offerings.
Understand your market
Before you launch your new online business, conducting market research can provide you with valuable insight that can help you get your business off on the right track.
Start by reviewing demographics and economic data provided by government agencies including the U.S. Census Bureau and the Bureau of Labor Statistics.
You can also glean important information by conducting research on your competition to see how they are positioning themselves and reaching their customers. If your business will be international in scope, investigate the market for your products and services in the countries in which you are considering operating.
Decide on a business structure: sole proprietor or incorporate/form an LLC
Before you begin operations, you have to decide whether you want to own the business in your own name (which would be a sole proprietorship if you are the only owner or a general partnership if there are co-owners) or if you want to form a corporation or a limited liability company (LLC). If you decide to incorporate or form an LLC, it is that corporation or LLC that owns the business. You will own the corporation or LLC.
There are pros and cons associated with owning the business yourself or through a corporation or LLC. And if you decide not to own it yourself, there are also advantages and disadvantages to the choice of a corporation (including whether to apply for S corporation status) or an LLC. The best entity structure for your business will depend on the facts and circumstances at hand. It can be helpful to discuss your options with a tax professional, a business attorney, or both before making a choice.
Compliance Obligations
Keep in mind that there are certain compliance obligations with having an LLC or corporation, such as having a registered agent and filing annual reports and/or franchise taxes with the state.
In addition, you may also need to file a beneficial ownership information (BOI) report for your corporation or LLC with FinCEN (U.S. Department of Treasury’s Financial Crimes Enforcement Network). A beneficial owner is the individual(s) who ultimately owns or controls the business. While there are exemptions to this filing requirements, most small-business LLCs and corporations will not qualify for an exemption. For more information, visit: Beneficial Ownership Information Report.
Name your online business
You will also need to choose a name for your new business. There are some legal considerations to be aware of. The “legal” or “true” name of a sole proprietorship or a general partnership is the name of its owner or owners. The legal or true name of a corporation or LLC is the name on its formation document. In almost every state, if you want to do business under a name other than the legal or true name you will have to register that “assumed” or “doing business as” (or “d/b/a”) name with the state or county where you are doing business. In addition, if you are forming a corporation or LLC your legal name will have to be available – meaning that no other business entity is on record with the state business entity filing office as having that name.
There are also marketing considerations. You want your customers to associate your products or services with your business’ name, whether it’s a word you make-up or a descriptive tag. As a general rule, it’s best to stay away from confusing or long names or overly clever names that your target audience isn’t likely to understand.
You may also want to hire a trademark attorney or service company to conduct a trademark search on your proposed business name.
Obtain required licenses and permits
Most businesses – even online ones – have to obtain business licenses or permits. Make sure you have registered your business with the appropriate state or local agencies as required in your state or jurisdiction and that you are meeting all licensing and permit requirements.
Most businesses will also need to obtain a federal tax ID number, register with its state taxing authority, and pay state and local sales taxes, and meet unemployment and workers’ compensation requirements.
Create a marketing plan
Your marketing plan will draw upon much of the work you did earlier, such as defining your business, identifying your customer base, and researching the competition. All of this will help you to determine your sales and marketing goals, and the strategies you will use to achieve them.
When your business is an online venture, your ability to drive visitors to your website is vital for the success of your business. SEO optimizing your website is one important way of driving “free” traffic to the site, though you may want to consider online advertising as another way to attract new customers.
Social media and email marketing can also play a critical role in reaching new customers and maintaining existing ones. Social media, in particular, can help you gain exposure, increase brand awareness, understand your customers, communicate with customers and potential customers, share information about your business, and drive traffic to your website.
Be sure your online marketing complies with the Federal Trade Commission’s Rules governing communications. If you are selling goods online, you’ll need to comply with the FTC’s “30-Day Rule” which says you must have a reasonable basis to believe you can ship your customers’ purchases within 30 days.
Create a website
Your online presence, including your website design and domain name, will be one of the most important elements to the success of your online business.
You will need to decide on the right domain name, register that domain, select a website host, and design your new website. Remember that your website represents your business, so it is critical that it is designed to aid your customers and potential customers in finding the information they’re looking for. If your site has an e-commerce component, you’ll also need to make sure the checkout process is simple and secure.
BizFilings can help
If you are starting an online business, BizFilings offers a variety of complimentary resources to help you get started. To learn more, contact us online.