Racine County is a great place to live and a great place to start a business. Both global and family-owned companies call it home. It’s close to Milwaukee and Chicago and offers a customer base that includes not only county residents but also commuters who pass through the corridor.
Before you open your Racine County business, however, there are several steps to consider in order to give yourself the greatest chance for success. Here are things that you’ll need to do.
1. Conduct market research
You may have a great idea for a new business, but you need to validate that it’s viable in this market. You also should refine your idea to ensure that it’s as competitive as possible. That requires market research.
Here are questions to ask:
- Are there similar businesses in Racine County? Are they doing well? How can you differentiate yours from theirs? Is there something you can offer that they don’t have?
- Are the demographics – age, income, etc. – favorable for your product or service?
- How many people would be interested in your offering? Where do they live?
Some of the demographic questions can be answered from existing statistical sources. You can learn more with direct research, that is, by actually asking people what they think of your idea, whether they’d buy your offering and how much they’d pay for it. You might do this through surveys, questionnaires, focus groups or one-on-one discussions.
2. Write a business plan
A business plan serves several purposes. It breaks down your dream into the steps it will take to realize it. It makes you think hard about how you’ll actually make your business succeed. It provides a road map for decision-making as you ramp up your business and as you manage it over time.
Also, you’ll need it if you intend to use any outside sources for funding. A potential investor will want to examine your business plan. If you plan to bring in partners or hire key employees, they’ll need to know that there’s a road map for success.
There are a number of available formats for a business plan. Typically they include:
- A summary
- A general description of your business
- An analysis of your market
- Your organization and management structure
- More details about the product or service you’ll offer
- Plans for marketing and selling your offering
- Your financial projections
If you’re unsure where to start, you can find pre-made templates online to assist you in writing your plan correctly.
3. Choose a business structure
Different business structures have different taxation rules. Business structure determines whether your personal assets are at risk. They drive record-keeping and reporting. It’s important to understand these and to decide which is right for you.
This is the most straightforward structure. You simply start doing business. Someone who is providing products and services from their home or a small office might use this. All business income is personal income and is taxed as such.
The biggest disadvantage is that there is no limit to your personal liability. You are responsible for any debts and any liabilities the business incurs, and creditors can come after your personal property to satisfy them.
This is the simplest structure for two or more individuals in business together. As with proprietorship, profits pass through to the partners for taxation. Service and professional businesses are often partnerships.
In most partnerships, each partner is fully liable for all debts the business incurs. There’s also a limited liability partnership, which limits the liability of one partner for the actions of another.
Limited Liability Corporation (LLC)
This popular option has the benefits of both corporations and partnerships. An LLC can have a single owner or be a partnership. In LLCs, personal assets are generally not at risk. LLCs don’t pay corporate taxes, but profits pass through to the partners and become personal income.
This structure requires significant record-keeping and reporting. You can simplify the complexities of starting an LLC if you opt for a formation service, which will take you through the process step by step.
Incorporation offers the highest protection from personal liability, but it comes at a cost. There is extensive reporting and record-keeping required. Most corporate profits are taxed twice: once in the form of corporate profits and again as income when they’re distributed to the owners. Some businesses are eligible to form S corporations, which avoid corporate taxes at the federal level and in some states.
4. Secure funding
Your business plan should tell you how much startup money you need. There are several ways to get it.
- Self-funding can come from your own savings, from friends and family and even from second mortgages and your 401(k). This way you have total control but also assume total liability. You could lose everything you invest and more.
- Venture capital comes from someone who invests money in your business and becomes part-owner. Venture capitalists will insist on seeing your business plan and financial projections before negotiating a deal.
- Crowdfunding solicits online contributions in return for a gift or perk. Terms vary, but usually, you retain control with little or no risk.
- Loans come from banks and credit unions. The Small Business Association (SBA) will often guarantee loans that might be too risky for a bank to write on its own.
5. Choose a location
Unless you’re going to run your business online or out of your home, you’ll need to choose a physical location. Racine County offers a great deal of diversity in population density and topography. There are municipalities and rural areas. There is an interstate corridor on I-94.
Your choice of location should depend largely on where your customers are, not only where they live but also where their traffic patterns take them. With some types of businesses, such as retail, visibility and accessibility are especially important.
Also, be aware of any zoning laws and local regulations that might affect your business.
6. Secure licenses and permits
If you haven’t already chosen a business name, you’ll need it for this step. Depending on your structure, you may need an entity name at the state level and a trademark at the federal level. You’ll want a domain name for your website. In Wisconsin, you’re required to file a Doing Business As (DBA) if you’re using anything other than your personal legal name.
Most business owners prefer to use the same name or similar names everywhere they have to register.
You must register with the Wisconsin Department of Revenue. For most Wisconsin LLCs, there’s a One Stop Business Registration Portal site where you can register with multiple agencies.
Unless you’re a single-owner company (sole proprietorship or LLC) without employees, you must have a federal Employer Identification Number (EIN). You’ll also need a Wisconsin tax ID.
There are certain types of businesses that require state or local licenses as well.
7. Open a business bank account
You should never write a personal check for a business expense or deposit business income into a personal account. Instead, open a business account. That could include checking, savings and a credit card account. You also need a merchant services account if you intend to accept credit and debit card payments. A federal EIN is required to open a true business account.
Business bank accounts have these important advantages:
- Limiting your liability by keeping personal and business finances separated.
- Offering purchase protection and personal information security for customers who use cards.
- Access to funds for major expenditures; many business accounts come with a line of credit as well as credit cards.
- Professionalism. Customers have more confidence when they can use a card or write a check to your business entity rather than to you personally.
Welcome to the Racine County business community!
There’s a lot involved in starting up a new business here in Racine County, but thousands have done it, and so can you. It’s easier when you take it step by step. And you’re not on your own. There are plenty of resources to get you off to an effective start.
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