Owning an online business gives you the opportunity to work from anywhere, set your own hours and make a living on the Internet. Online businesses can also have extremely low startup costs—making them perfect for a new entrepreneur without a lot of cash. Below is a guide on how to Start An Online Business.
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Choose a Business Structure
You must decide whether you want to operate as a sole proprietorship, limited liability company or corporation before you start a business
An individual or husband and wife can operate as a sole proprietorship. This is the simplest type of business structure and it doesn’t need any paper work to be filed. However, sole proprietors have no protection from liability for the business’s debts and obligations.
For this reason, most people who plan to start a business choose to form a limited liability entity for instance, a limited liability company or a corporation. The owners of these types of business entities are typically not personally liable for the business’s obligations.
An LLC is generally more flexible and involves less record-keeping and reporting than a corporation. However, a corporation may be a good choice if you want to bring in money from outside investors.
Decide Where to Form Your Business
You’ll have to form a corporation or an LLC or by filing paperwork with the state.
For most small businesses, it’s best to file formation documents in the state where you’re located. With this, you’ll be able to avoid the added costs of registering to do business in your home state and hiring an out-of-state registered agent. However, if your business will have significant nationwide activity or you expect to attract venture capital, you might consider incorporating in Delaware.
Choose a Name
Take your time and choose a unique name for your online business. A name that will stand out. A unique name:
- Helps you market your business
- Minimizes the chance that a similarly named business will accuse you of trademark infringement
- Increases the chance that you’ll be able to get a domain name that matches your business name
- Complies with state law requirements that corporation or LLC names be different than all other entity names registered in your state.
Once you have a name in mind, conduct Google search to see if any existing business has a similar name. Also, search trademarked names at the U.S. Patent and Trademark Office website, and most states allow you to search registered business names online.
Get a Domain Name
As soon as you decide on a name, register a domain name for your business. Your internet address is known as your domain name, it typically end in “.com.” You can check for any availability of your proposed domain name by typing it into the address bar of your Internet browser and seeing if an existing website pops up.
Many companies offer domain name registration—you simply set up an account, identify the name you want to register and pay an annual fee.
File Your Business Formation Papers
Planning a business entity requires the filing of documents with the state agency that handles business filings. You’ll be required also to pay a filing fee, this fee varies from state to state. Once your corporation or LLC is formed, you’ll receive a certificate confirming that your new business entity exists.
Set Up Your Finances
You can obtain a federal tax ID number from the Internal Revenue Service website. You may decide to use your Social Security number if you’re a sole proprietor or a single-member LLC.
You’ll also need to open a business bank account when starting an online business and, if you’re going to be processing transactions through your website, an account with Paypal or another online payment service.
Understand Sales Tax and Licensing Requirements
You’ll most likely be required to pay taxes for transactions in any state where your business has a physical presence, this only applies if you are selling things online. Its advisable to contact your state’s taxation department and/or an accountant to find out your responsibilities as this procedures vary from state to state.
You should check with your city or county to find out if you need a business license or are required to register a fictitious business name or DBA.
Set Up Your Website
You will need to purchase web hosting if you want to get your website up and running. This is typically offered by the same companies that provide domain registration. The purpose of hosting is to give your website a place to live on the Internet.
It’s possible to set up a website yourself, but unless you’re a designer or Web developer, you can expect a pretty steep learning curve. It is good to hire a professional to help you with some or all of the following: configuration of the site to look the way you want and also include the features you need; creating and inserting a logo; optimizing the site for search engines; and creating text and images. But this will require more budget.
Once you’ve chosen a name and business structure, filed paperwork with the state and set up your website, you’re ready to get going with your online business. Bear it in mind that the Internet is always a busy place and you can’t sit back and wait for customers to come to you. Be creative and look for ways to actively promote your business through online advertising, social media and old-fashioned word of mouth.
You can also see some tips to help you start a restaurant in Canada.