How to start a business in Georgia in 8 steps
Thousands of people across the country dream about owning a business someday. However, having a dream isn't always enough when it comes to entrepreneurship. Along with coming up with a business idea, you will need to consider the type of legal structure you want to form or how you will attract customers.
If you have never gone through the process of starting a small business, it can be overwhelming. To help improve your odds of success, Huckleberry has outlined 8 important steps you will need to follow in the early stages of your company.
1) Think about the type of business you want to start
Starting a Georgia business is exciting. This is one reason why many small business owners jump directly into the planning portion of the process without giving much thought to what type of business they should start. However, without properly thinking through your business idea, issues can arise.
This is especially true for entrepreneurs who choose a new business simply because it can yield significant profits. Instead, you should consider forming an organization that you’re passionate about. Often these types of companies will be more enjoyable to run and are easier to invest time into.
However, choosing the type of business you’re passionate about isn't the only thing you should consider. Another essential factor you should weigh is the amount of competition in the area.
It can be challenging to open up your dream restaurant if several establishments already offer the same type of food within a couple of miles. Even if you have a secret recipe or plan to do things differently at your eatery, it will be challenging to gain traction initially.
Besides competition and passion, the following are all important criteria to consider when picking a business to start:
- Customer demand
- Startup costs
- Growth potential
- Time commitment
Conducting research on each area above will allow you to quickly determine if it is a good idea to open a particular business or look for other opportunities.
Throughout the process, you may begin to question whether or not it is the appropriate time to even start a business. After all, running a business requires an enormous investment in time, money, and energy, especially during the first couple of years. If you’re wondering whether a company makes sense, ask yourself a few of these questions.
After asking yourself all the appropriate questions, if you decide opening a small business is the right thing to do, the following 7 steps will help you start your business.
2) Set up your legal structure
Once you have chosen the type of business you want to start, the next item on the list is to determine what business structure makes sense for your company. Generally, the legal entity you end up using will be based on several factors, including:
- Number of owners
- Number of employees
- Your desired amount of liability protection
- Desired tax benefits
Various types of businesses will naturally make more sense as an LLC or corporation over a sole proprietorship. That is one of the reasons why you will want to spend some time looking into each structure before settling on one.
Descriptions of the most common legal structures have been provided below to help you determine the best route to go.
If this is the first time you have set up a business entity, going the sole proprietorship route makes a lot of sense. It is often the easiest legal structure to establish in Georgia and is an excellent option if you aren't planning to have employees. Also, there is typically less paperwork involved, and sole proprietors don't have to worry about a complex business tax model.
Even though sole proprietorship provides a simplistic option for business owners, it does have some drawbacks. One of the biggest disadvantages involves liability.
With this type of legal structure, owners have no protection when it comes to their personal assets. If a company, set up as a sole proprietorship, can no longer pay its debts or is sued, the owner could be held personally liable.
Limited Liability Company (LLC)
An alternative for owners who want more liability protection is to use an LLC or limited liability company. One of the most significant benefits of an LLC is the flexibility it provides. Not only can it be quickly established by owners who work alone, but it works well for businesses with a large employee base too. Just like with sole proprietorship, there isn't much paperwork involved in the process.
The main reason why many business owners decide to form an LLC is the liability protection it provides. With an LLC, if the business is ever unable to pay off its debt, the only thing the debtors can go after is business assets. This wall of protection for personal assets is generally why most people choose an LLC.
Other major benefits of having your business established as an LLC include:
- Flexibility in how the organization is structured
- No requirement for a board of directors
- Fewer reporting requirements compared to corporations
- Business names aren't required to have the owner's personal name
Many types of businesses perform better when they're set up with more than one owner. If you're in a situation where you plan on having a partner in your company, then you should consider a legal structure such as a general partnership.
With a general partnership, responsibilities and company rights are evenly split between the partners. While this clarifies what each partner is entitled to, it also means that each partner can be personally liable for any debts that the business can’t cover.
A unique option available for multiple business owners is a structure called a limited partnership. Unlike general partnerships, where everything is split equally, limited partnerships consist of two different types of partners—general partners and limited partners.
Typically, general partners will take on more risk but will be the ones to run the business. On the other hand, Limited partners have ownership in the company but cannot make management decisions. In exchange for this power, limited partners won't be held liable for business debts.
Georgia small business owners also have the option of forming a corporation. Generally, most Georgia corporations are broken into two main categories, C corporations, and S corporations. Both options provide business owners with personal asset protection and a rigid operating process. There is also an opportunity to have shareholders and a board of directors.
Business owners who are seeking to support a cause or movement should consider setting up a nonprofit organization. These entities are often funded by donations and don't have investors like other businesses. Many also have favorable tax models, where some may even be exempt from paying taxes altogether.
After you have settled on one of the organization structures above, you will want to make sure you follow the appropriate process to finalize setting up your legal entity. Below is a small checklist of items you may need to complete during this step:
- Pay filing fees
- Complete the articles of incorporation
- Complete the articles of organization
- Complete an operating agreement
3) Name and register your business
Even though the way you structure your company is important, there might not be any other step as exciting as choosing your organization's name. Not only does it allow you to be creative, but your business name serves many purposes. For instance, it is the starting point for telling the story of your brand. It will also be the first thing customers see when looking at your products or services.
So when you’re considering different names, you will want to think about how you want customers to view your company. Some owners choose a flexible name that will allow them to scale and expand into new areas without a rebrand. Others opt for a name that has a personal meaning behind it.
Keep in mind that the business structure you decide to establish could play a factor in what needs to be included in your company name. Sole proprietorships, for example, require that the person use their personal name in the business unless they establish a DBA, or “doing business as.”
After you have picked the perfect business name, you will want to make sure you register it with the Georgia Secretary of State. Once the registration is complete, you should also consider establishing an Employer Identification Number (EIN) or appointing a registered agent.
4) Apply for licenses and permits
Companies that operate in Georgia do not need to carry a general business license. Instead, there are several licensing requirements that you may need to meet on the county or city level. The exact requirements that apply to your actual business will depend solely on the type of company you’re running.
For help determining which permits your organization needs, you can look to resources such as the Small Business Administration (SBA) or search on the Georgia State Website. Once you have the appropriate licenses and permits, it is good to put processes in place to keep your business compliant and your licensing active.
5) Choose a location
Every business is different and, as such, has different business needs when it comes to location. ECommerce companies don't have to worry about opening a storefront but should think about the domain name they use. Retail businesses like clothing stores will want to secure a location with a great deal of foot traffic.
Ultimately, while you’re creating your business plan, you will want to take this all into consideration. Choosing a bad location can significantly impact how successful your business can be. In fact, if it is bad enough, the area can cause the organization to go under.
6) Open a bank account and prepare for future taxes
Many new entrepreneurs believe it makes sense to use a personal checking account when first starting a business. However, this can't be further from the truth. Not having a business bank account can be disastrous for accounting, especially if the IRS ever audited your company.
Having a business bank account lets you easily keep track of sales and expenses while also building a financial relationship with your bank. In addition to the account, you can also look into business credit cards or business loans to help with funding new projects.
Couple with banking, you will also want to start preparing for business taxes early on. It can become overwhelming if you try to do it a few weeks before the tax deadline. As a general guideline, most businesses will be required to pay state tax, federal tax, income tax, withholding tax, and sales tax.
If you want more information about the taxes you will be paying, the Georgia Tax Center provides abundant resources, including a FAQ section.
7) Purchase business insurance
With much of the hard work behind you, it is time to talk about the best way to protect your business, your employees, and yourself. Small business insurance is by far one of the most overlooked steps in the business creation process. Most owners are aware that they need protection for their company but aren't sure exactly what they need.
To help simplify the process, Huckleberry has created a Georgia small business insurance policy that bundles several essential insurance products into one coverage. The bundle includes policies such as workers' compensation insurance, unemployment insurance, and liability insurance.
8) Create a marketing plan, hire employees, and more
Now that your business is ready to open its doors, you should take a moment to review other aspects of your company. For example, do you have a marketing plan in place? If not, then you will want to start thinking about how you will scale.
If you’re currently getting the majority of your business through word-of-mouth advertising, then you should consider adding another business development strategy to the mix. Likewise, if you plan to grow, you will want to determine when it makes sense to add additional team members to the organization.
A lot of entrepreneurs believe that success will happen overnight, but this usually isn't the case. It can take months or even years before your business becomes successful. The most important thing to keep in mind is that learning and growing are the keys to success.
Whether you’re a new entrepreneur or a successful serial entrepreneur, Huckleberry can help keep your business protected. All it takes is 5 minutes to find an affordable small business insurance policy that fits all your business needs.