Get Started FAQ

 SBDC Frequently Asked Questions (FAQ) and Answers about Starting a Small Business

• I am thinking about starting a small business. Where do I start?
• What does it take to run a small business? I don’t know if I am "entrepreneurial".
• What are some good businesses to start?
• What type of business is least risky?
• Do I need any licenses of permits?
• Do I need any special insurance?
• I am considering having a business partner. Is that a good idea?
• What form of legal ownership is best?
• Business Plan; do I need one?
• How do I figure out how much money I’ll need?
• How do I finance it?
• Are there any grants to start a small business?
• What do I need to do to hire employees?
• Can I start a business part-time?
• Can I work out of my home?
• Do I need to know anything about technology (computers and the internet)?
• Where can I get help with all this?

I am thinking about starting a small business. Where do I start?

Before you take the plunge, here are some first steps to take:

• Ask yourself, "What are the main reasons for wanting to start a business?" Talk to or read about successful small business owners. Compare your answer with theirs. Are your reasons realistic?
• Conduct a "Personal Assessment" of your skills and personality to see what areas might need work or might hinder your success, as well as what your strengths are.
• Conduct some brief research of the market. Is there a need for your product or service that is not being met adequately?
• Talk to small business owners in a similar type business. Determine what your day will be like. Try working a day in a similar business to see what it would be like and what you would be doing all day.
• Take a class on "starting a small business." Contact your Local SBDC or college to find out what classes are offered.
• Move through the ‘Do you want to go into business?’ needs assessment. It provides suggestions on what you can do to assess your current situation, and provides next step referrals based on where you are in the process.

Now you may be ready for this list of second steps to take.

• Write a business plan. View our section on Business Plans for more information.
• Ask yourself, "Does this plan show that the business will generate enough revenues to pay all of its expenses, provide an adequate compensation to you, the owner, and also provide an adequate return on your investment of time and money?"
• Get necessary financing. (See "How do I finance my business" below)
• Secure a location.
• Register get licenses/permits
• Obtain insurance. Arrange for utilities and phones.
• Set up a record-keeping system; consider hiring an accountant or bookkeeper.
• Order inventory and supplies
• Take your business plan and develop a "marketing calendar" of specific marketing activities indicating the dates when you will do them.
• Hire and train employees. Consider an employee manual; determine policies/procedures.

What does it take to run a small business? I don’t know if I am "entrepreneurial".
Conduct an assessment of your personal skills and characteristics. Ask yourself:

• Am I organized?
• Do I have experience in this type of business?
• What skills do I bring to the business? What ones will I need to hire? Can I hire them?
• Can I support myself and/or my family financially during the early start-up months when cash may be short?
• Do I have a cheering section, such as family or friends?
• Do I have my family’s support?
• Am I healthy? Am I willing and able to put in long hours (50-60 hours per week) to get this business started? Am I willing to work weekends, if necessary, and put off vacations for a year or two?
• Do I like people?
• Am I a leader?
• Can I deal with stress?
• Am I a self-starter?
• Can I make decisions?
• Do I have some of my own money to put into this business? Can I provide at least 25% of the money needed to start this business?
• How is my credit? Can I borrow money?
• Am I willing to put up my house, car or boat for collateral?
• Am I prepared to temporarily lower my standard of living until the business is established, if necessary?
• Am I self-confident?
• Do I have a fallback plan?
• When things get tough, will I have the drive to hang in there?

What are some good businesses to start?
Some of the factors that go into making a business a "good" one to start have to do with what might be suitable for you:

• Your skills: your experience, interests, and talents. A good business to start is in a field you love. You may be working 60 hours a week; so it should be something you enjoy doing. Start with an inventory of your skills, your interests, what you have enjoyed doing in the past. What you will be doing all day. Is this how you want to spend your days? For example, do you like working with people? Consider your potential customers and employees, would you like working with them?
• Is it feasible? Some things to consider and topics you will work on in your Business Plan are:
  • Cash to start the business. Do you have enough money to start it without going into debt? If you need to borrow money, how is your credit? Do you have assets to pledge as collateral for the loan amount? Are you willing to risk losing these assets to borrow money? If you have no collateral, do you have some one who will co-sign the loan?
  • How easy will it be to find good employees?
  • Is there really a demand for your product or service? Is there any competition (if not, think twice, there may not be sufficient demand)? How will you set yourself apart from the competition?
• There are two types of philosophies in starting a business. The first type is much harder to do than the second. Which category are you in?
  • Build it and they will come
  • Meeting a demand that is identified, and not being adequately met. See our special section on Marketing.

What type of business is least risky?
Probably the least risky is one that needs little money to start; can be started part-time so you can continue working full-time, can be expanded later on; and would be easy and not very costly to close down if you changed your mind, and something you already know how to do (don’t need extra training). Some service types of businesses may fit: writing/editing; web site design; consulting/counseling; handyman work; lawn and garden maintenance (especially if you already have the equipment), health-type workshops (yoga, for example). Careful planning, including a good business plan can help you to minimize the risk. Visit the licensing page to learn more about structuring your business.

Do I need any licenses of permits?
All new businesses need to obtain a Washington state business license and a Unified Business Identification Number (UBI). In addition, certain business activities require special registration or agency authorization such as selling liquor, cigarettes, and lottery tickets. You can get the Master Business Application forms from the Department of Licensing in Olympia at 360-664-1400.

• A copy of the completed Master Business Application is forwarded to the Washington State Department of Revenue who will then send you the appropriate state tax forms and information for your business
• Check with your local city and county to see if any business license is required or with your Local SBDC Office. Check with your local health department for food handling permits and licenses.
• If you are going to hire employees you will need to get an employee identification number (EIN) from the IRS. A good source of tax information for small businesses is the "Tax Info For Business" section of the IRS web site.
• Contact the Secretary of State to file Articles of Incorporation or a Certificate of Limited Partnership if your business has either type of ownership. 360-753-7115 in Olympia.

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Do I need any special insurance?
Consider getting the following types of insurance.

• General liability insurance
• Personal property, fire, theft
• Vehicle insurance
• Business interruption insurance

Talk to an insurance agent about your needs. If you have employees you will need workers compensation insurance. For more information on workers compensation insurance see the L & I website.

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I am considering having a business partner. Is that a good idea?
First ask your self why you want a partner? Does that partner have the money to finance the business start-up? Does the partner’s skills complement yours? Do you and your partner have the same vision for this business? It is best to have written partnership agreement. Your SBDC can help you develop one. (To locate your nearest SBDC click here) Things to consider are:

• Roles and responsibilities. Who will do what? How will you make decisions? How will you resolve conflicts?
• How a break-up of the partnership will be handled. You may be in agreement now, but remember people and circumstances change.

What form of legal ownership is best?
In determining the best form of ownership you need to consider how many owners there will be, how complex the management structure of the business will be, liability and tax implications. Contact a tax accountant and an attorney to discuss your needs.

Here are the basics:

• Sole Proprietorship: The simplest and most common form of ownership. A sole proprietorship is owned by an individual (or married couple). It may have employees. Operating as sole proprietorship means that the owner is personally responsible for all the liabilities of the business. For federal income taxes, the business is taxed at the personal level for all profits generated by the business. The business does not have to file a separate tax return.
• Partnership: Two or more people agree to share ownership of a business. Owners share, and pay personal taxes on the profits of the business. Each partner is individually responsible for the liabilities of the business.
• Limited Liability Company (LLC): is a combination of the corporate form of ownership in that it provides limited liability and the partnership, which allows you to be taxed as in a partnership.
• Corporation: A corporation is a separate legal "person," wholly apart from the individual shareholders who own it, and limiting the liability for the owners.
• C-Corporation: Most large businesses operate as C-corporations. A C-corporation may have different classes of stock (such as common and preferred) and an unlimited number of shareholders. A C-Corporation files its own federal tax return in which corporate profits are taxed and then the owners are taxed on their share of the profits.
• Subchapter S Corporation: This form of corporation is limited to one class of stock, and a limited number of shareholders. An S-corporation does not pay a corporate tax.

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Business Plan; do I need one?
Yes, even if you are going to finance the venture yourself. A business plan is a tool for you to think through the development of your business and ensure that you have considered all the potential difficulties and opportunities. One basic part of the business plan is a projection of your expenses and revenues to determine if it is feasible.

Detailed instruction on how to develop and build a business plan is available via our section on Business Plans.

How do I figure out how much money I’ll need?
There are two uses of money:

• Start-up costs: What you need just to get your new business started. Make a list of everything you will need to get open: equipment, initial inventory, fixtures, lease costs, office supplies, vehicles, signs, fees & permits, pre-opening advertising, brochures, web site design;
• Operating costs: What you will need until your business reaches break-even (where your revenues pay all your bills): rent, utilities, phone, employees wages, payroll taxes, advertising, inventory, insurance, bookkeeping. Your Business Plan will help you to determine how long it will be until your break-even.

How do I finance it?
Determine how much money you need:

• Start-up expenses
• Operating expenses for perhaps as much as 6 months depending on what your cash flow projection (part of your Business Plan) indicates.

Most common sources are:

• Most small start-ups are funded through personal resources: savings, loans from family, friends, other investors; home equity loans; cash value of life insurance. See how much you can raise from these sources.
• Banks will lend to some business start-ups if they are satisfied with your Business Plan; your level of experience; your credit history; and the collateral you have to pledge to the loan. In general, you will need 25-30% of the money yourself.
• Other loans. There may be some specialized loans from non-bank lenders that will fit your needs. These loans may be in conjunction with a bank loan. See your local SBDC Offices for specifics.

Are there any grants to start a small business?
See our special page on Grants

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What do I need to do to hire employees?
If you are going to hire employees you will need to get an employee identification number (EIN) from the IRS.

Some tips on hiring:

• Decide what you want your employees to do. Be specific. In many small businesses you need employees who can be flexible and do several kinds of tasks.
• Interview and screen with care. Prepare good questions. Check their references and background.
• Check the SBDC hiring section to find out more about hiring and managing employees.

Further details on employee paperwork requirements can be found on the Labor & Industries website.

Can I start a business part-time?
Starting a business part-time can be a good way to "test the waters." Whether it is feasible or not depends on the type of business and your job requirements. Be careful not to have a conflict-of-interest with your job and employer. Best to check. Best where your time spent on the business can be flexible.

Can I work out of my home?
Many small businesses can operate from home. Check with your local city and county to see if permits are required. Consider your neighbors. If your business activity will bother them or be objected to because of noise, odors, parking, or other issues, perhaps you should not do it. Consider your personal home situation as well. Do you want customers coming to your home? Do you have a separate home office you can use exclusively for the business? Will family members object? Do you have the discipline to sit in your home office and work or will you be tempted to go out and work in your garden on a nice day?

Do I need to know anything about technology (computers and the internet)?
It is hard to think of a business that doesn’t depend on or can’t be helped by technology, even if it is using a computer for your record keeping. See the SBDC  sections on E-business and Computer use

Where can I get help with all this?
Your local Washington Small Business Development Center (Washington SBDC) can help. In addition, you may want to use the services of an accountant or bookkeeper and attorney. An accountant or bookkeeper can help you set up a record-keeping system to manage the business’s financial transactions and meet its tax reporting requirements. An attorney can help you formalize the legal structure if you are considering a partnership, LLC, or corporation (S or C); review legal agreements if you are purchasing a business; or your lease agreements.