Entrepreneurs and experienced business owners are looking to establish their next ventures in our beautiful Sunshine State, and there has never been a better time to do so. According to The Florida Legislature Office of Economic and Demographic Research, “In the latest revised annual data, Florida finished the 2014 calendar year with 5.0% [economic] growth over the prior year—above the national growth rate of 4.4% and ranking 9th among all states.” This upward trend is expected to continue, as Florida’s technology, financial, and tourism industries attract entrepreneurs from all parts of the state to start their own business.
But, launching a new company takes significant time, money, and know-how to succeed. That doesn’t mean a novice can’t start their own business and prosper - everyone starts out small and your first business is a great opportunity to learn and develop your entrepreneurial skill. Starting your own business requires a few simple steps and applications, which you can easily complete and open your business in no time.
Most businesses stem from the entrepreneur’s hobbies, talents, passions, or experience in their professional fields. But, not everyone who has talent succeeds. Before you invest in your business idea, you should Test your idea, and develop a business model to support it. Even the best products won’t make it to the market without a solid business and marketing plan to guide you and your team. Pitch your idea to friends and colleagues, and ask for feedback to make your business model viable before starting the business.
After you’ve tested your product or concept, you can start creating your brand. A brand consists of the logos, slogans, marketing materials, and the mission statement you set for your company. A brand is the personality you want to create for your business. It speaks to your customers, and persuades them to choose you over the competition. You can start small, with your company name, a simple logo and a website or social media page to feature your team and products. If you start to gain traction from promoting your brand, you should start to set up your business as a legal structure.
The first major decision you’ll have to make on behalf of your company is the ownership structure. Do you want to be the sole owner of the business, or are you working with partners? Will you be able to grow quickly enough to need the legal protections of a corporation? There are several ownership structures you can register in Florida, but the most common for small businesses are sole proprietorships, partnerships, and limited liability corporations (LLCs). Sole proprietorships do not require additional paperwork (aside from proper business licenses). But a partnership requires a partnership agreement, while an LLC requires you to file Articles of Incorporation with the state.
Once you establish the ownership structure of your company, you should register your business name as a DBA, set up a business bank account, obtain proper licenses, and register with the IRS for tax purposes. With all of your accounts set up, you will then be ready to streamline transactions and even start looking for funding opportunities.
Everyone who has had a new business idea knows how difficult it can be to transfer it from your mind to a working product or valuable service. Startup businesses develop from disorganized sparks of creativity. But you, as the entrepreneur, are challenged to create something tangible, relevant, and profitable from that creativity. The best way is to start small, by organizing your thoughts and creating a viable business model that suits your market.
Write it Out - Many entrepreneurs can envision how they want their company to operate, and what their product does or provides to the consumer. But, they have a hard time conveying that message to others. Communicating your idea to potential customers, partners and investors is crucial in the early stages of your business. Develop a strong pitch by writing out your business concept using 75 words or less. Your pitch should inform the listener of:
A brief introduction of your company, and you as the entrepreneur
The problem you hope to solve with the product
Who would benefit from using your product
How you plan to scale
What you need to reach the next steps of your business
Draw it out - Identifying these five core elements of your business will help you solidify your business idea, and make it as simple as possible for you to start. I your idea is too complex to explain in 75 words, you may want to rethink how you’ve structured your business. A useful tool for configuring your business setup is the Business Model Canvas. This free resource for entrepreneurs has seven sections, which you should identify as part of your business model:
Value Proposition - The solution you provide for a problem you intend to solve, or the solution upon which you plan to improve against the competition
Key Partners - The distributors, retailers, mentors, and other people you need to bring your product to market
Key Activities - The actions you need to take to launch your product
Key Resources - The raw materials, marketing materials, and other resources you plan to use to launch your products and market them successfully
Cost Structure - Calculating the cost per unit, and other costs associated with operating your business (hours, overhead, marketing expenses, etc.)
Customer Relationships - Planning how you will reach new customers, engage current ones, and bring former customers back for repeat sales
Revenue Streams - Deciding all the services you will provide, and the pricing associated with both products and add-on services
Channels - Channels of distribution, including retail, wholesale, online and direct sales
Customer Segments - The different demographic groups you plan to center your marketing strategy
(Tip: if you’re having trouble figuring out everything you need for the Business Model Canvas, use Plan Cruncher to develop a simple summary which you can also use as a pitch).
Test the Market - After you’ve done all the planning, and can explain your concept easily to those who ask, it’s time to test your market by offering a prototype or demo to potential customers. You need to identify your market niche early on, and find the proven methods to how reach them effectively. Research your competition to see what they’re doing right, and what you can do better to gain a market share. Once you’ve completed these steps you’ll have the foundations for a business plan.
The business model canvas (discussed here ), helps you visualize and summarize how your business model generates revenue and if it has the potential to scale. But do you really need to plan beyond that? Many entrepreneurs either spend too much time, or no time at all planning for the course of their business plans at the beginning of their venture. Either you’re thinking too much, or acting out of impulse. The necessity of a business plan depends on how long you’ve been in operation, and what your goals are for the upcoming year.
Traditionally, a business plan is written before a company opens to the public. It is used as a strategic tool, and as part of the marketing toolkit to attract investors to the company. But, with startups moving so fast and networking becoming a less formal business development activity, many entrepreneurs don’t wait to write a business plan before selling their product or service to customer and investors. If you can market to customers without a business plan, why write one?
The answer is actually very simple: if you plan to raise capital, you need a formal business plan. Investors will expect you to provide one before you pitch to them, and if it is not well written or presented you won’t receive a positive response. But, f you just launched your business, or are operating as a freelancer/sole proprietor, you may not need a formal plan. Once your business scales to include more employees, or becomes more complex than the business model canvas can describe, then you may want to consider writing a full business plan.
Your business plan, whether formal or informal, should detail your course of action and financial projection for the upcoming year. The core elements you must include in your plan are:
Executive Summary: A brief, one page summary of your business model, and what you want to accomplish with your company
Market Summary: A description of your target market, backed by research and estimated total available and serviceable available market.
Product or Service Review: Describe what your product or service is, what problem it solves, and why it is advantageous over competing products or services
Organization and Team: Outline the roles each of your team members are responsible, and who makes decisions for specific departments of your company
Marketing Plan: Based on your research, describe what tactics and programs you plan to execute in order to obtain market share
Sales Goals: Set target revenue goals for each month, and describe your sales strategies to meet these goals
Financial Projections: End your report with a detailed summary of what you expect your revenue and expenses will be for each month. Make sure you can justify your revenue growth with previous sales.
If you can answer these questions, then you are ready to make a business plan. Have a professional or a mentor read over it and make suggestions. Next, you’ll want to look for legal advice to prepare for your first round of fundraising.
The topic that scares most entrepreneurs away from launching their startups is legal responsibility. No one knows at the beginning the legal processes required to set up a business, and most of the time you want to be working on growing your sales rather than growing the stack of paperwork on your desk. But all business owners are responsible for following the laws and procedures of their state. Florida requires only a few legal documents, but there are several you should prepare as you start to grow your enterprise:
Fictitious Name Registration. In Florida, sole proprietorships are required to apply for a fictitious name certificate. Also known as your“Doing Business As,” (DBA) name, you must register this and place an advertisement in a local newspaper in your primary.
Professional licenses. You will need to research your industry to determine what licenses you need to operate lawfully in Florida. The Florida Department of Business and Professional Regulation has plenty of information on the largest industries in Florida to guide you through the legal process for each license your business will require.
Memorandum of Understanding. An MOU is not a legally binding document, but it is used to help solidify partnerships between your company and other organizations. You can ask partners to sign or create an MOU as a first step towards creating a legally binding contract.
Employee Handbook/Agreements. Once you have enough business to hire employees, you will need to write employee agreements for them to review and sign. The agreement should detail the expectations, correctional procedures, benefits and other company regulations.
Nondisclosure/Noncompetition Agreements. All companies have trade secrets or intellectual property they need to protect. A nondisclosure agreement safeguards you from your employees who may have access to this information and the ability to share it. Some industries also have their employees or subcontractors sign a noncompetition, to ensure your employees are not sharing information to your competitors.
Corporations have additional legal documents they must provide. A corporation is considered a separate entity from the individuals who own or manage it. To set up your business as a separate legal entity, you need to file Articles of Incorporation, or an Operating Agreement (for LLCs). Corporations should also write bylaws to detail the hierarchy of their executive staff, and track meeting minutes for company audits.
If you have any questions about how to set up a business in Hardee County, click here for more information. In the next section, we will cover when to consult an attorney for setting up your business entity.
At some point, you will need to hire a lawyer to incorporate your business, receive consult on a legal matter you’re unsure of, or to figure out how to protect yourself from intellectual property or copyright infringement. These tasks are daunting to say the least - probably at the very bottom of your “to-do” list. But hiring an attorney for your startup may surprisingly bring peace of mind once you find the right person.
There are many reasons why it’s best for you to hire an attorney for consultation before you even begin to set up a legal business structure. Hiring a lawyer to avoid legal trouble is less expensive than hiring one to get out of it. If you plan to incorporate your business, or have intellectual property you want to protect, you need to hire a lawyer before you ever open your doors to the public. But if you’re just starting out, have a sole proprietorship, or are not quite ready to launch your product or service, you may have the ability to wait until after you launch your product or service.
An attorney’s expertise is useful when writing contracts, looking for real estate, filing taxes and learning how to protect your IP. But one is not necessary for the following business procedures:
Trademarks - You can trademark your brand collateral through the U.S. Patent and Trademark Office’s Trademark Electronic Search System. This process is very simple, and does not require legal consultation.
Legal Structure and Licenses - You may want to talk with a lawyer about creating a sole proprietorship or LLC, and obtaining the right business licenses, but it is not required. There are many online resources to help you setup your business’ legal structure and comply with Florida’s license regulations.
Contract Agreements - You can write and distribute contracts between you, employees, suppliers, and partners. If you have specific questions, contact your attorney or ask a mentor to help you edit your documents.
EIN registration - Your Employer Identification Number is required for tax purposes, but you can register for one without the help of your lawyer. Click here to learn how.
You can go the “do-it-yourself” route for most of these business functions, but sometimes a lawyer is absolutely necessary, and it’s best to find one that suits you as soon as you are ready to launch your business. You need a lawyer for incorporations, patents, litigation and buying or selling your business. Incorporations and filing for patents takes a lot of time and paperwork, neither of which you want to do on your own. And of course, the time to hire a lawyer is not after someone has filed a lawsuit against you. It’s in the beginning, when you can prevent legal trouble from hurting your company.
Meet with several attorneys and see who has the most experience (that you can afford). Senior lawyers charge twice as much or more than an inexperienced attorney, but may be able to finish projects in half the time. Most importantly, you should establish a relationship of trust and clear communication between you and your attorney, as you’ll be working closely with them for years.
Incorporating your business only requires fees from the state government. However, there are several hidden costs that can make the process more than you had expected. Learning as much as you can about the process to incorporation can help you save money and time when setting up your business’ legal structure.
First, you have to file Articles of Incorporation with the Secretary of State. In Florida, LLC and S-Corporation fees are $99. You may have to pay for other government filing fees, however Florida has some of the most business-friendly regulatory systems in the nation. You can view the complete list of Florida Incorporation fees and regulations at the Florida DMV website.
Aside from your incorporation fees, you will likely want to consult an attorney. Some attorneys offer a flat rate for incorporation legal services, while others charge by the hour. Ask your attorney how they bill, and if they require upfront payment or a deposit on their services. An attorney can cost anywhere from $500 to $1500, depending on their experience level and the firm’s reputation.
While it may seem an unnecessary expense, having a trusted lawyer to help you file for Articles of Incorporation can save you time and the stress of navigating the legal landscape of business. Plus, you won’t have to worry about making mistakes when a professional manages your legal processes. It gives you the chance to work with an attorney for the first time, who you may wish to hire for future services.
After you have incorporated your business, you will be expected to pay additional fees and taxes. Your corporation is a separate legal entity, which means the profits incurred every year will be taxed, separate from the income tax of your principals and shareholders. However, a single-member LLC (where the owner serves as the board of directors) is not required to fill out a separate income tax return for the company.
Incorporating your business is relatively inexpensive in Florida, but if you do business in other states (such as a joint venture), you may have to pay for additional fees. For example, California requires a first year franchise tax prepayment for every business that files for incorporation. These fees do not apply in Florida, but if you do plan to have locations outside the state, you should check with the local laws to make sure you are operating within the legal statutes of that state.
Determining how you want to incorporate is a crucial step to preparing your company to open. You should first research the different types of corporate structures when filing for your Articles of Incorporation.
You may have heard that the easiest way for a new business to incorporate is by establishing an LLC, which is much like a sole proprietorship or partnership with limited liability protection. But an LLC may not work for you, or the type of business you’re trying to build. Incorporating costs more than setting up a sole proprietorship or partnership, but provides added benefits and protection for you as the founder. It also opens the door for funding opportunities, which you may want to seek within the first few years of operation.
All corporate entities have protections against business debts, liabilities, and creditor claims. This is the primary reason small businesses choose to incorporate, even if they are singly owned and operated. Corporations are set apart from other businesses in that they have a board of directors, officers, and follow different tax rules than sole proprietorships and partnerships. Below are the corporate structure you can file as in Florida; each have their own benefits and limitations which you should consider closely before filing Articles of Incorporation:
C Corporations. A C-Corp exists as a separate legal entity according to the law. This means that neither shareholders nor founders are personally responsible for business debts. However, the corporation is taxed separately from the directors’ and shareholder’s income, which results in a “double taxation” on business profits. The Board of Directors is appointed by shareholders, and the directors choose officers. C-corps can sell stocks, and are required to hold annual meetings and report meeting minutes to government officials of the state.
S Corporations. In an S-corp, the owners or Board of Directors are considered employees as in a C-corp, but the corporation doesn’t pay separate taxes. S-corporations are also required to report annual meeting minutes, and are allowed to sell stocks. This business structure benefits small businesses because they are not double-taxed, but employees are still protected from liabilities of the company’s losses.
Limited Liability Corporations. LLC owners are self-employed, but are not liable for creditor claims and debts. The owners serve as a board of directors, but one person can claim all positions. This business structure is a logical next step for sole proprietors who wish to have additional legal protection from business liability. An LLC can not issue stocks, however it can have multiple owners who share a percentage of equity.
It is worthy to note you can also establish a limited liability partnership in Florida. LLPs are very similar to LLCs in that they have multiple owners who share equity, and they do not have to pay direct taxes on the corporate entity. However, members of an LLP are not liable for the debts or misconduct of another partner in the business. In an LLC, if another owner is liable for a debt or lawsuit, the entire corporation is held responsible. But in a partnership, this is not the case. LLPs are usually formed by attorneys, medical professionals, accountants, and other fr other professional services.
Florida is one of the most friendly states for small businesses. There are very few fees you need to pay in order to operate your company, and most are processed within a few days. The first step you should take when forming a new business is registering your fictitious name, or “Doing Business As” (DBA). A DBA registration allows you to do business under a name other than your own, but it does not register that name as a trademark.
Filing for a fictitious name costs $50 in Florida, for a processing fee. A certificate of status costs $10, but is not required. To file for a fictitious name, visit the Florida Department of State website and click “Register a Florida Fictitious Name.” If you then wish to trademark your name and logo, you will have to file separately under the U.S. Patent and Trademark Office. Trademarks can cost anywhere between $225 and $325, depending on how you choose to apply. You can find more information about trademark requirements here.
You must send a DBA application to to the Division of Corporations in Florida’s Department of State. Your check, or online payment will go to the Dept. of State, and should be registered in less than a week. Online registration usually takes between 2-3 business days. You can check with your local government office to see when your DBA is officially registered.
You can file a DBA yourself, but you can also choose to use an online service that will complete the paperwork for you. These services can help save you time, but cost extra to use. If this is your first time starting a business, it may benefit you to use one of these online services. However, it is also wise to learn how to do this yourself if you plan to start multiple business ventures throughout your career. It will also save you money that you may need to spend on licenses, trademarks or other business-related purchases.
Fictitious names are valid in Florida for 5 years. You must renew them by December 31st of the fifth year of registration, which costs $50 in processing fees. Your first registration should tell you at the bottom when you must renew. Keep track of your renewal dates for both a DBA and trademarks when you file for them the first time.
DBA registration is one of the least expensive steps to opening a new business in Florida. If you need help filing for one in Florida, contact the Hardee County Economic Development Council. Our staff can walk you through the process to set up your DBA today.
Most startup companies are self-funded their first years in operation. But eventually, you may want to consider outside funding as a means for business growth. You may have to give a percentage of your company equity to an investor, but you will be able to maximize your capital and worry less about personal surmounting debt. There is a process you must follow in order to get from personal funding to an acquisition or venture capital.
First, you will likely reach out to family and friends, or crowdfund from your community. Your close friends and relatives may be willing to contribute small amounts in support of your venture. Just be sure to clearly communicate the terms of their contribution. (Will you have to pay them back? If, so will they ask for a small profit? What happens if you business does not succeed?) Borrowing from those you know can cause tensions, so be careful who you ask.
Crowdfunding is another small-scale fundraising alternative. You can collect small donations or investments in your company, and offer contributors special benefits, such as early access to your first product, or discounted service rates when you are finally operational. Most crowdfunding contributors do not expect equity in the company, as very few will offer more than a few hundred dollars. However, if your community thinks you have a really great idea, you may be able to secure your first round of funding this way. Plus, you may have new customers!
Once you’ve proven your ability with crowdfunding, you may want to reach out to angel investors. An angel investor is someone of high net worth who contributes their personal funds to startups. They usually contribute between $10,000 and $25,000 to companies, or invest in an angel fund. As an entrepreneur, angel investors are a valuable asset, because they will mentor you and allow for more favorable shareholder terms than would a venture capitalist. Angels also provide credibility for your company, which will help you achieve the next round of venture capital (VC) funding.
Companies who look for VC funding are usually well-established and have a proven track record for growth. A venture capitalist will want to own a larger percentage of company equity, and will not invest in the company’s ownership as an angel investor would. It takes significant time and business development skill to schedule a meeting with a venture capitalist. First, you must submit a full business plan to your prospecting investor. After meetings, the VC will offer terms of their investment, and perform due diligence on your company to compare it to other offers. If they choose to fund your business, you will create term sheets and secure the funding with your new VC.
How do you decide when to look for funding? Ultimately, it is up to you to decide when you can bootstrap, and when you want help from others. And be sure when you do offer investment opportunities that you are comfortable with selling some equity in your business. Start small, and work your way into a network of investors with a strategic plan.
Many small and hobby business start when the entrepreneur quits their day job to pursue a career as a freelancer or independent contractor. These small enterprises may eventually build into professional organizations, but there is some discrepancy between who is a sole proprietor business, and who is simply an independent contractor. However, almost all those who are self-employed are considered business owners.
Under the law, anyone who files their own taxes (in contrast to someone whose employer withholds their taxes) is technically a business. Single-person companies can be considered independent contractors, sole proprietors, or limited liability corporations. Though all can be considered businesses, the role of the owner changes with each business type.
The primary difference between independent contractors and sole proprietors is your DBA. If you operate under your legal name, you are an independent contractor, but if you register for a fictitious business name, you are a sole proprietor. Either way, you will have to file your revenue and business expenses on your personal tax returns. Also, as a sole proprietor you have the option of hiring employees under your business entity. However, you do not need employees as a sole proprietor.
A single business owner can also become an LLC, to protect themselves from personal liability of business debts. If the business cannot repay its creditors, they must go after the business rather than the individual. An LLC requires Articles of Organization that you must file with the state. An LLC must have a board of director, but the owner can represent each of the positions on the board if they do not wish to have employees.
Self-employed taxes are higher than employee taxes, because they account for both the “employee’s” and the “employer’s” taxes, even though they are one in the same. LLCs, sole proprietors must follow this sort of tax laws, but an independent contractor does not. Independent contractors pay lower taxes because they do not pay for their client’s taxes too.
As your business grows, you may want to look for help. But, you can still have a one-person company and hire freelancers or service providers, and count them as a business expense rather than an employee. A single-person company can also easily change their business status (for example, changing from a sole proprietor to an LLC). However, if you wish to form a C-corp, S-Corp, or Limited Liability Partnership, you will need to add employees or at least a board of directors.