Though new companies are known for having a 50/50 shot at making it successfully through their first five years, 54 percent of all sales in the U.S. can be attributed to its 23 million small businesses, according to the U.S. Small Business Administration (SBA).
In conjunction with stimulating the economy, small businesses also provide employment for Americans — specifically, they are responsible for creating more than 55 percent of all jobs, and have contributed 8 million new jobs since 1990.
There's no question that starting a small business has a positive impact on communities. Before diving into entrepreneurship, the SBA recommends asking yourself the following questions, among others:
- What kind of business will I start?
- What products/services will it offer?
- Where will the company be located?
- Is the name I want available?
- Will obtaining a loan be necessary?
- What makes my business unique?
- How will I advertise and compete?
In addition to those considerations, aspiring entrepreneurs should consider what business structure they will choose. According to the SBA, "The business structure you choose will have legal and tax implications." The types of structures include:
- Sole proprietorship
- Limited Liability Company (LLC)
- S Corporation
Each of these options provide different structures in terms of ownership, liability and taxes. For example, while a corporation is best suited for a company with multiple employees, sole proprietorship might be a good option for an entrepreneur that is largely self-dependent. An LLC, on the other hand, lends small business owners more flexibility and tax efficiency.
Starting a company is a challenging task that requires thorough preparation, and determining its brand identity, targeted consumer base and business structure are all essential to making it through those first five years.