The dictionary definition of an entrepreneur is “A person who organizes and operates a business or businesses, taking on greater than normal financial and other risks in order to do so.”
Most simply defined, an entrepreneur is a person who identifies a need and starts a business to fill that void. This basic definition, however, provides little insight into the specific character traits and attributes that make a person thrive as an entrepreneur.
To strike out on the entrepreneurial journey takes, among many other qualities, perseverance, passion for your mission, ability to question your decisions and assumptions and embrace change.
The successful entrepreneur is an open minded, confident, determined, disciplined self starter who has a strong work ethic and strong people skills.
Definition: A business that legally has no separate existence from its owner. Income and losses are taxed on the individual’s personal income tax return.
The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts. A sole proprietorship can operate under the name of its owner or it can do business under a fictitious name, such as Nancy’s Nail Salon. The fictitious name is simply a trade name–it does not create a legal entity separate from the sole proprietor owner.
The sole proprietorship is a popular business form due to its simplicity, ease of setup, and nominal cost. A sole proprietor need only register his or her name and secure local licenses, and the sole proprietor is ready for business. A distinct disadvantage, however, is that the owner of a sole proprietorship remains personally liable for all the business’s debts. So, if a sole proprietor business runs into financial trouble, creditors can bring lawsuits against the business owner. If such suits are successful, the owner will have to pay the business debts with his or her own money.
Simply put, an LLC, or Limited Liability Corporation, is the least complex business structure. Unlike an S-Corporation or C-Corporation, the structure of an LLC is flexible. Starting an LLC also gives you the perk of pass-through taxes, limited liability (obviously), and legal protection for your personal assets. Plus the added benefit of looking more legit than the other guys.
There are both advantages and disadvantages to setting up your business as an LLC. It’s important to do research and seek legal advice to determine if an LLC is the best entity type for your business.
A C-Corporation is the most common type of corporation in the U.S. C corporations (C-Corps) offer unlimited growth potential through the sale of stocks, which means you can attract some very wealthy investors. Plus, there is no limit to the number of shareholders a C-Corp can have.
Among the many benefits of a C-Corporation:
- Limited liability. This applies to directors, officers, shareholders, and employees.
- Perpetual existence. Even if the owner leaves the company.
- Enhanced credibility. Gain respect among suppliers and lenders.
- Unlimited growth potential. The sky’s the limit thanks to the sale of stock.
- No shareholders limit. However, once the company has $10 million in assets and 500 shareholders, it is required to register with the SEC under the Securities Exchange Act of 1934.
- Certain tax advantages. Enjoy tax-deductible business expenses.
There are both advantages and disadvantages to setting up your business as a C-Corp. It’s important to do research and seek legal advice to determine if a C-Corp is the best entity type for your business.
An S corporation is a special structure of business ownership by which the business is able to avoid double taxation because it is not required to pay corporate income tax on the profits of the company. All profits/losses are passed on directly to the shareholders of the company.
There are both advantages and disadvantages to setting up your business as a S-Corp. It’s important to do research and seek legal advice to determine if a S-Corp is the best entity type for your business.
An L-Corporation is the same as an LLC or Limited Liability Corporation, is the least complex business structure.
If your organization is involved primarily in educational, scientific, religious, or charitable endeavors, you’ll probably want to form a nonprofit corporation for the liability protections and tax advantages this status provides.
Incorporating your nonprofit will set legal protections in place that can keep you and your directors’ personal assets separate from the company’s liabilities.
While nonprofits are bound by different state laws than for-profit enterprises, in general their formation processes are quite similar. Like a regular corporation, nonprofits must file Articles of Incorporation with the state in which they wish to incorporate.
In addition, the IRS requires nonprofit organizations seeking tax-exempt status to file Form 1023. Several states also require organizations to file for state-level tax-exemption. The nonprofit status most commonly sought by organizations is the Internal Revenue Service’s 501(c) tax-exempt status. Organizations that qualify for 501(c) status enjoy the following advantages:
- Tax-exempt status. Qualifying nonprofits can apply for federal and state tax-exempt status
- Enhanced credibility. Potential donors may be more inclined to give to an organization that has an official nonprofit status
- Tax-deductible donations. Donations made by individuals to the nonprofit corporation may be tax-deductible
- Possible exemption. from certain property taxes.
- Reduced postage rates.
There are a number of other benefits to forming a nonprofit, as well.
- Limited liability protection. Directors and officers are not personally liable for the organization’s debts and liabilities.
- Perpetual existence. The corporation continues even if a director leaves the business or passes away.
- Eligibility for grants. Nonprofits may be eligible for certain public and private grants.
Virtually every business needs some form of license or permit to operate legally. Knowing which one you need, however, can be a little tricky. It depends on the type of business you are operating, where it’s located, and what federal, state and local government rules apply.
To help business owners navigate the process, SBA.gov offers links to state-specific license and permit information.
The majority of U.S. entrepreneurs start their businesses on a shoestring. According to 2014 Census data, more than 40 percent of all small businesses started up for under $5,000.
A good place to start is to research what it will cost to start your business in your geographic region, in your industry, or in your marketing niche.
It is very likely that you will be responsible for a business permit, license and/or incorporation fees, so check with your county and state to find out how much that will cost you, or use a service.
Many states, cities and counties have on line resources that will help you understand these costs. In Nevada, a great place to start is https://www.nvsilverflume.gov/home.
Other upfront costs could also include:
- Website development
- Security deposits on various services, office spaces or rentals
- Business cards and stationary printing
- Signage for your storefront
- Computers, software and other office equipment
- Heavy machinery or vehicles
- Furniture, decor and supplies for either an office or retail space
The business model canvas is a great tool to help you understand a business model in a straightforward, structured way.
Using this canvas will lead to insights about the customers you serve, what value propositions are offered through what channels, and how your company makes money.
Alexander Osterwalder, of Strategyzer, created the Business Model Canvas.
Definition: The process of gathering, analyzing and interpreting information about a market, about a product or service to be offered for sale in that market, and about the past, present and potential customers for the product or service; research into the characteristics, spending habits, location and needs of your business’s target market, the industry as a whole, and your direct and indirect competitors.
Market research involves two types of data:
- Primary information. This is research you compile yourself or hire someone to gather for you.
- Secondary information. This type of research is already compiled and organized for you. Examples of secondary information include reports and studies by government agencies, trade associations or other businesses within your industry. Most of the research you gather will most likely be secondary.
There are hundreds of books about how to start a business. This is a very short list of tried and true resources:
- Blank, Steve & Dorf, Bob; The Start-up Owner’s Manual: The Step-By-Step Guide For Building A Great Company
- Kawasaki, Guy; The Art of the Start 2.0
- Levinson, Jay & Jeannie; Guerilla Marketing, Guerilla Marketing on the Internet, and Guerilla Marketing on Social Media
- Osterwalder, Alexander & Pigneur, Yves; Business Model Generation: A Handbook For Visionaries, Game Changers and Challengers
- Richardson, Clinton; Growth Company Guide 5.0
Also consider a starter book on finance, such as “Finance for the Non-Financial Manager.” If you are not strong in the subject of finance, such books take financial concepts and deliver them in consumer-friendly terms. A key focus should be on three financial reports: profit & loss statement, cash flow statement and the balance sheet.
A startup incubator is a collaborative program designed to help new startups succeed. Incubators help entrepreneurs solve some of the problems commonly associated with running a startup by providing workspace, seed funding, mentoring, and training. The sole purpose of a startup incubator is to help entrepreneurs grow their business.
Here is a list of the most common services provided by business incubators:
- Help with business basics
- Networking opportunities
- Marketing assistance
- High-speed Internet access
- Accounting/financial management assistance
- Access to bank loans, loan funds and guarantee programs
- Help with presentation skills
- Connections to higher education resources
- Connections to strategic partners
- Access to angel investors or venture capital
- Comprehensive business training programs
- Advisory boards and mentors
- Management team identification
- Help with business etiquette
- Technology commercialization assistance
- Help with regulatory compliance
- Intellectual property management and legal counsel
Here are some proven techniques for expanding your professional network:
- Ask members of your current network for referrals.
- Join professional or trade organizations.
- Attend professional/trade meetings, shows, etc.
- Attend networking events.
- Contact former professors, college alumni association, and/or career-services office.
- Join or ramp up your activities on social and professional networking sites link LinkedIn
- Join or start job club.
- Conduct informational interviews.
- Contact former co-workers, vendors, customers/clients.
- Join us at an Entrepreneurs Assembly Roundtable!
Whether you are opening a local boutique or starting an international distribution company, you will most probably be bootstrapping your business in the beginning from your own funds or Friends and Family. Borrowing money from friends and family is a classic way to start a business.
Other sources of funding when you are first starting out include:
- Small Business Loans
- Trade Equity or Services
- Incubator or Accelerator
- Small Business Grants
- Local Business Plan Competitions