The first step in starting a business is unsurprisingly, knowing what type of business to start.

Picking a profitable business is important, but I also advise clients to choose a business idea based on both personal interests and current industry trends. While it may seem obvious, focusing on areas where you have experience or education can greatly improve your odds of success. Research should be done on target markets and potential customers for your service or product, including understanding specific needs they have today, which helps validate whether there’s demand for what you want to sell. It may even be worthwhile to build a prototype early to test assumptions around functionality, appearance, etc.

Maybe you already have an idea picked out, or maybe you are still deciding on one. Regardless, you can check out our library of business ideas to get detailed industry information, trends, costs to start, tips, and lots more.

Once a solid business idea is in place, it’s time to start working on the business plan. When creating a business plan, you should outline your vision, goals, and strategies. This includes defining what problem your business solves for customers, who those customers are, as well as competitive insights, sales channels, pricing models, financial projections, milestones, fundraising efforts, and more.

Many people only consider writing a business plan because the bank asks for one in order to get funding. While that’s a valid reason, more importantly, writing a business plan gets the ideas out of the entrepreneur’s head and helps create a roadmap for where they want the business to go. While a great plan doesn’t guarantee success, not having one will likely result in costly mistakes that could have been avoided.

Related: How to write a business plan

The next step to starting a business in Oregon is selecting a business entity. A business entity refers to the legal structure under which a company operates. The most common types of business entities in Oregon are sole proprietorships, general partnerships, corporations, and Limited Liability Companies (LLCs).

A sole proprietorship is an unincorporated business owned and run by one person. It’s the simplest and most common form of business entity. The owner has complete control over the business, receives all profits, and is responsible for all debts and liabilities. Pros include ease of formation, minimal paperwork, and simple tax filing. Cons involve unlimited personal liability, which means your personal assets may be at risk, and potential difficulties raising capital.

A general partnership is a business owned by two or more people. In this structure, two or more individuals own and operate the business together. Each partner shares in the profits, losses, and management responsibilities, and they are all personally liable for the business’s debts and obligations. Pros include ease of formation, shared management, and relatively simple tax filing. Cons include unlimited personal liability for each partner, potential conflicts in decision-making, and challenges in raising capital.

A corporation is a separate legal entity from its owners (shareholders), which means the owners are not personally liable for the business’s debts and obligations. There are two main types of corporations: C-Corporation and S-Corporation. The primary difference lies in the tax treatment. Pros include limited liability for shareholders, easier access to capital through stock issuance, and greater credibility with customers and suppliers. Cons involve more complex formation, extensive record-keeping, and potential double taxation (in the case of C-Corporations).

Related: How to form an Oregon corporation

An LLC is a hybrid business entity that combines the features of a corporation and a partnership. It offers personal liability protection for the owners and the ability to choose how the business is taxed. Pros include limited liability, tax flexibility (LLCs can choose to be taxed as a sole proprietorship, partnership, or corporation), and fewer formalities compared to corporations. Cons involve more complex formation than sole proprietorships or general partnerships.

Related: How to form an LLC in Oregon

When choosing a business structure, it’s important to consider your personal liability, taxes, and management structure. Each business entity has its unique pros and cons, and it’s important to weigh these factors carefully before making a decision. For example, sole proprietorships and partnerships are easy and inexpensive to set up, but they offer little liability protection for the owners. Corporations and LLCs offer greater liability protection but are more complex and expensive to establish. By understanding the unique features of each business entity, you can choose the one that is best suited for your specific needs and goals.
 

There are several federal, state, and local rules and regulations Oregon businesses need to register for and comply with. Some common registrations include:

Business Licenses: The state of Oregon doesn’t have a general business license. Some cities or counties in Oregon require businesses to obtain local licenses or permits. These requirements vary depending on your business’s location and type.

Employer Identification Number (EIN): The IRS issues an EIN to identify business entities operating exclusively in Oregon for payroll taxes, filings, and other related tax matters. Partnerships, corporations, and most LLCs OR sole proprietorships with employees MUST register for an EIN.

Business Name Registration: Sole proprietorships or partnerships operating under a fictitious business name or DBA (Doing Business As) will need to register for an Assumed Name, commonly known as a DBA or Doing Business As, with the Secretary of State’s office.

Business Identification Number: A business with employees in Oregon needs to obtain a Business Identification Number from the Oregon Department of Revenue.

Occupational Licenses: Numerous professions require state-issued occupational licenses. Examples range from healthcare professionals, plumbers, electricians, contractors, cosmetologists, and accountants, among others.

Related: What business licenses and permits are needed in Oregon?

Having separate personal and business bank accounts makes it easier to track the income and expenses of the business. Mixing personal and business finances can lead to tax complications, difficulty tracking expenses, and potential legal issues. Separating your finances helps maintain clear records, simplifies tax reporting, and provides a more accurate picture of your business’s financial health.

Opening a business bank account in Oregon involves the following steps:

Choose the right type of business bank account: There are several types of business bank accounts, including business checking accounts, savings accounts, and merchant services accounts. Evaluate your business needs and choose an account that best suits your financial requirements and growth objectives.

Research bank options: Compare various banks and credit unions in Oregon, considering factors such as fees, interest rates, account features, and customer service. Look for banks with a strong reputation for supporting small businesses and entrepreneurs.

Gather required documentation: To open a business bank account in Oregon, you’ll need the following documents:
– Employer Identification Number (EIN) or Social Security Number (for sole proprietors)
– Business formation documents (such as Articles of Incorporation or Articles of Organization)
– Ownership agreements (if applicable)
– Business license or permits (if required)
– Personal identification (such as a driver’s license or passport) for all account signatories

Visit the bank: Once you’ve gathered the necessary documentation, visit your chosen bank or credit union to open the account. Some institutions may allow you to open an account online, while others may require an in-person appointment.

Deposit initial funds: Banks typically require an initial deposit to open a business account. This amount varies depending on the financial institution and account type.

Set up online banking and other services: After opening your account, enroll in online banking, and explore other banking services such as bill pay, mobile banking, and credit card processing to streamline your financial management.

Funding options for small businesses vary depending on factors like credit worthiness, income stability, collateral availability, ownership structure, and the amount of capital sought after.

Personal savings remain a primary source many startups use, particularly during the early stages. A potential disadvantage arises when founders utilize their entire life savings or retirement nest eggs; there might not be any backup resources left over if things go awry.

Borrowing money from friends and family members who share confidence in founders’ visions becomes another frequent option. Since these loans are often interest-free or at low rates with lenient repayment terms, they offer greater flexibility compared to traditional lenders. On the downside, informal arrangements involving close connections increase the likelihood of misunderstandings, hurt feelings, or lost relationships should disputes arise.

Conventional bank loans from banks and credit unions are commonly used by small businesses. These loans typically have lower interest rates than alternative lending options but will require a personal investment, collateral, and a strong credit history. Be sure to research and compare different banks and credit unions to find the best loan product and terms for your business.

The U.S. Small Business Administration (SBA) offers loan guarantee programs designed to help small businesses access capital. The SBA does not provide loans directly but guarantees a portion of loans made by participating lenders, reducing the risk for lenders and making it easier for small businesses to qualify.

Microloans are small loans, typically up to $50,000, designed to help start-ups and small businesses with limited credit history or collateral. In Oregon, organizations such as the Oregon Association of Microenterprise Networks (OAMN) and Mercy Corps Northwest offer microloan programs and technical assistance to support small business growth. These loans often come with more flexible terms and requirements compared to conventional bank loans, but they may have higher interest rates.

There are various types of investors that may be interested in funding your business, including angel investors, venture capitalists, and equity crowdfunding. Angel investors are high-net-worth individuals who invest in start-ups in exchange for equity or debt, while venture capitalists are firms that invest in high-growth, high-potential businesses. Equity crowdfunding platforms allow businesses to raise capital by selling small equity stakes to a large number of investors. Each investment type has its pros and cons, and it’s crucial to choose the right investment source that aligns with your business’s goals and needs.

Related: Understanding the different types of business funding

Hiring an employee is a crucial step in expanding your business, but it also comes with legal and administrative responsibilities.

Before you begin the hiring process, familiarize yourself with federal and state labor laws and regulations to ensure compliance. Employers will need to register with the Oregon Department of Revenue, Oregon Employment Department, and Oregon Department of Justice. In addition, most employers will be required to carry workers’ compensation insurance.

Employers are also responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.

Related: Steps to hiring your first employee in Oregon

Starting a small business is an exciting venture. However, it’s important to consider the risks and unexpected events that can occur while running your business. That’s where insurance comes in. Investing in the right types of insurance policies protects your business and assets from potential legal and financial issues.

As a small business owner in Oregon, insurance is essential for protecting your business in case of a lawsuit or unforeseen circumstances. For instance, if a customer slips and falls in your store, you could face a lawsuit that could bankrupt your business. With insurance coverage, you can rest assured that you’re covered for legal expenses and potential damages.

Related: Types of insurance your business may need

Setting up a good bookkeeping system for your business is important to ensure long-term success. Bookkeeping is the process of recording, organizing, and maintaining financial transactions, which is vital for tracking your business’s financial health, ensuring tax compliance, and making informed business decisions.

Businesses must keep track of their income, expenses, assets, and liabilities using appropriate accounting methods. Failure to adhere to these laws may result in fines, penalties, audits, or even legal action from government agencies like the Internal Revenue Service (IRS) and the Oregon Department of Revenue (ODOR). Also, by tracking income and expenses throughout the year, business owners can identify opportunities to reduce their tax liability through deductions, credits, and other strategic measures.

Related: Setting up accounting for a business