As of 2019, small businesses made up 99.9% US businesses. The importance of small businesses to the economy was emphasized when President Joe Biden declared 12 to 18 September as National Small Business Week.
One of the first steps when starting a business is obtaining business financing. How you fund your business will impact business structure and how you run your business. The first question is how much funding you need. Depending on the amount of funding required, there are various options available:
With self-funding, you use your own financial resources to start your business. This money can come from a savings account, friends and family or your 401(k). The downside to self-funding is that you take on all the risk yourself. However, it allows you to retain complete control over the business.
Venture capital is typically an investment in return for equity in the business. The upside to this is that there is no loan to repay. The downside is that you will need to give up a degree of ownership and control of your company. Investment can come from a venture capital firm or an ‘angel investor’. The investor will review your business plan and perform a due diligence review. If the investor decides to invest in your business, you will need to iron out the terms and conditions of the investment before the funds are received.
Crowdfunding is a low risk capital raising option. You obtain funds on a crowdfunding platform from crowdfunders who do not expect repayment. Rather they expect a ‘gift’ in return, such as a product that your business sells. With this type of funding, you retain full control over your business and do not need to pay back the funding amount should anything go awry.
Small Business Loan
A small business loan can be obtained from banks and credit unions. Before approaching either, you should have the following documents prepared:
- Business plan
- Expense sheet
- Five year financial projections
Small Business Administration (SBA) Investment Programmes
The SBA offers three investment programmes should you not be able to obtain traditional funding:
- Small Business Investment Company (SBIC)
- Small Business Innovation Research (SBIR) program
- Small Business Technology Transfer (STTR) program
Incorporating Your Business
One you have your business financing secured and you are ready to hit the ground running, you may be ready to incorporate a corporation or limited liability company (LLC).
It is possible for you to incorporate your business yourself. However, as a new business owner there are multiple pressing issues requiring your attention, and there are services that can assist with incorporation to take that task off your plate. Five of the top rated incorporation services may be the right choice for you and your business.
ZenBusiness is an entrepreneur favorite and for good reason. They charge only $39 for their incorporation service, which includes a year of free registered agent services.
Incfile, another entrepreneur favorite, offers incorporation services for $0, which also includes a year of free registered agent services.
- Northwest Registered Agent
Northwest charges the most of all the top five rated incorporation services with a price tag of $225. This includes a year of free registered agent services, which goes above and beyond that of other companies, as they scan every document they receive on behalf of your business and not only those they are legally required to.
BizFilings has a very user friendly incorporation process which is simple enough for even the least experienced entrepreneur to follow. The fee for their incorporation services is slightly higher than other companies but does include six months of registered agent services.
LegalZoom is one of the best known and most popular incorporation services, having assisted over 4 million customers. At $149, the incorporation service fee is pricier than alternative companies, especially since it does not include registered agent services. However, if you are unhappy with the service you can submit a request for a refund within 60 days and they offer a 100% satisfaction guarantee.
You can read more about these incorporation services on Incorporation Rocket.
Obtaining funding for your business, including considerations of how much funding you need and the way in which you fund your business, are important decisions for any entrepreneur when setting out on a new business venture. If the type of funding you choose lends itself towards a corporation or LLC, new business owners may want to enlist the help of an incorporation service to get their business up and running.