By The Wyoming LLC Attorney TeamJune 01, 2023
There’s a common misconception that starting an online business doesn’t require the same level of care as launching a business with a physical storefront. While an online business provides some advantages and is easier to start than a brick-and-mortar company, you still need to pay close attention when forming your business.
With that being said, starting an online business shouldn’t be intimidating. The ability to host a business without needing a dedicated physical location has been a huge asset for entrepreneurs who don’t yet have the capital to make major investments in their businesses.
To ensure that you start your company off on the right foot, we’ve created this guide to show you how to start an online business. In this article we’ll cover the steps you need to take when starting your business, provide you with reasons an online model works, give you some tips for market research, and answer some frequently asked questions:
To avoid mistakes when starting a business, you should spend a significant amount of time considering the right format for your company. Online businesses have advantages and disadvantages, just like brick-and-mortar businesses. Being aware of these factors will help you make the right choice to help your company achieve its goals.
Here are a few of the reasons people choose to start an online business instead of a more traditional brick-and-mortar business:
An online business is always open. Even if you don’t offer 24/7 support, customers can always find and visit your website. This constant presence combined with customers being able to find your business from the comfort of their home can be a huge asset for you.
Compared to other types of businesses, starting an online company is cheap. Companies with a physical location need to pay for office equipment, building leases, and other costly features. An online business only needs to pay to host their website and register the business with their state. This low-cost approach makes online businesses particularly appealing to young entrepreneurs and anyone who is risk averse.
Online businesses have no true ceiling on their growth potential. While physical businesses are limited by real estate costs and local demand, an online business is limited only by your willingness and ability to grow.
With an online company, you can sell products or offer services to just about anyone in the world. Retail websites and other forms of online businesses already represent a massive portion of the world economy, and experts expect that growth to continue well into the future.
The actual process of setting up an online business doesn’t meaningfully differ from setting up a physical location. In fact, whether the company has a physical office or is online makes less of a difference than the chosen business structure.
When you choose to start an online business, you’ll need to follow these steps to make sure your company conforms properly to your state regulations. For this example, we will be setting up an online LLC.
When you create a company, you need to ensure that its name is unique. States do not allow for two companies of the same name to exist in the state, though if you manage to vary the name and have it sound similar that may be acceptable. If you are forming an LLC, you will often need to include LLC, L.L.C., L.C., LC, Limited liability company, limited or some other form of these terms as part of the name.
When searching for a unique name, you can check the business name database provided by your state. This can often be found on the Secretary of State’s website. To hold a name, most states allow you to file a statement of reservation of name. There is usually a fee associated with reserving a name, and it holds the name for a limited time.
A registered agent represents the company and serves as the primary point of contact for official communications. Any legal notices will go to the registered agent. The registered agent can be you, another employee, a resident of the state, or a company based in the state. These rules are generally true, but check your secretary of state’s website to ensure your state does not have different rules.
The articles of organization is the form that you file to start your online business. This form can usually be found on the secretary of state’s website. There is typically a small filing fee associated with this document, and it must include the following information:
While it is not strictly necessary to have an operating agreement in most states, it is very useful to have one in place. An operating agreement outlines how your company is run. It details job functions, management rules, and managers. The operating agreement also dictates important responsibilities and rules such as who will pay the bills, how the company will handle liability concerns and profit sharing, and how to carry out buy/sell agreements.
If you are the sole employee of your company, an EIN is not necessary as you can use your Social Security Number. However, even if you are the sole employee of your company, obtaining an EIN is a good way to protect your privacy. An EIN can be requested from theIRS website.
Once you’ve decided that you want to start an online business, you need to set it up properly. Follow these nine steps to form an effective online company:
Starting an online business may be easier than setting up a brick-and-mortar company, but that doesn’t mean it’s risk-free. When creating a company, you need to make sure that you have realistic goals and a plan to achieve them.
Consider the product or service that your company will offer and compare it to other competitors in the same market. Think about what sets you apart and how you can market that differentiator to capture customers. If your idea is something that already exists and is satisfying customers well, then it’s worth reconsidering your idea in favor of something with greater potential.
A business plan is essential for success. Even if you don’t plan on gathering funding or have very modest growth goals, a business plan will help you. Taking the time to sit down and envision the future of your business can help you avoid obstacles before they derail your efforts. Plus, it’s often easier (and cheaper) to plan ahead than it is to adjust to unexpected difficulties.
Good business includes marketing strategies. You can use this planning phase to identify your target audience and create a roadmap that can guide your company through turbulent early stages.
Choosing a business name may sound simple, but more goes into it than you might think. You need to find a name that describes your business, differentiates you from the competition, and is unique.
Remember, as an online company, your name is extra important. That’s because people need to be able to use a search engine to find the company. You should choose something easy to remember and easy to spell. This will maximize the chances that a prospective buyer who already knows about your company will find it.
Your business structure influences every aspect of your company. It determines how your business can operate and the way that it is taxed. Some structures you might consider are:
Once you’ve chosen your business structure, it’s time to actually form the company. Each state has different laws regarding the formation of each business structure, so check with your local governance. Generally, this information will be on your state’s secretary of state website.
While not strictly necessary, it’s always a good idea for a company to have legal counsel. Business law attorneys not only protect you during legal issues but also prevent them from happening in the first place. When creating and running your business, an attorney can provide advice and help you avoid mistakes that could open you up to personal liability.
As you might have guessed, an online presence is essential for any online business. It’s helpful to think of it as your storefront. Your online locations need to be appealing, easy to locate, brand-aware, and approachable.
Some of the things you need to consider when establishing your online presence include:
This step only applies if you are planning to run a retail business. You do not usually need sourcing and fulfillment methods for a service-oriented company.
If you are running a retail operation, spend some time thinking about how you will get your goods into the hands of your customers. You also need to consider how you will create the products if they aren’t being made by you.
With the company launch imminent, it’s time to create marketing materials. You should develop customer profiles and target audiences based on their needs and how your products or services address those needs. Remember, the likelihood that your business offerings appeal to everyone is low, so focus your attention where it will have the greatest impact.
Once your materials are in hand, consider how you will deploy them. If your audience leans younger, consider advertising on social media platforms with a lower average user age. If your audience leans older, consider the opposite. Targeted media campaigns take a bit more time on your end but are ultimately more effective than broad campaigns, with a few exceptions.
Now that you are ready to deploy your marketing strategies and have the logistics of your business handled, it’s time to launch. You can announce your company through social media, an email blast, and/or advertising.
Market research is essential for any company, but its importance is even greater for online businesses. Without a proper understanding of your market, you could end up advertising to people who just don’t care about what you’re offering, which wastes your money and produces almost no results.
Fortunately, there are lots of ways to research potential markets before you spend money on a costly advertising campaign. Here are some of the ways you can conduct market research:
Advertising to the right group of people is a must. Take a look at the groups that most frequently use your products. If you haven’t started your company just yet, you can see who is buying from your competition. With the correct target audience identified, you can develop targeted marketing materials that are more effective at capturing the attention of your target group.
This free method of market research is used by companies of all sizes, and for good reason. Looking at a search engine can steer you away from ineffective strategies and put you on the path toward success, provided you know how to read them.
To start your search engine research, run searches in Google for your product or service category and look at what appears first. The pages that appear near the top are your primary search competition. You can learn even more by looking at the type of information that is on those pages. For example, determine if your keywords tend to produce informational or sales content in the search engine results page. Once you have that information, write the appropriate page types for the keyword.
When you know who your competitors are, you can learn from them without having to go through the whole process of making mistakes and finding out what works. You don’t want to copy them, but you can observe what is most effective about their marketing strategies and integrate what works. For example, you can observe who they target, and either target the same audience or target an underserved audience who you believe would benefit from your company’s products or services.
Keyword tracking allows you to see how audiences perform searches. Based on this information, you can revise existing webpages on your site to better reflect searcher intention or add blog articles that aim to capture search terms that you haven’t yet integrated into your website.
Starting an online business is very similar to starting a brick-and-mortar business. You need to follow the guidelines laid out by your state to create your chosen business structure. Beyond that, you must establish an online presence and focus on standing out online rather than capturing the attention of people as they walk by your business.
Generally, you do not need a special license to sell online internationally, though that can depend on the product and the country in question. You should always be aware of the laws in each country that involve your product and its sale. If a country prohibits the product you sell, or otherwise makes it difficult to sell the product effectively, consider adding a disclaimer on your website that you do not ship to those countries.
Starting a SaaS company can be both exciting and challenging. While barriers to entry are relatively low, and the tools and technologies to develop a SaaS product are widely accessible, building a successful SaaS company requires dedication, perseverance, and the ability to overcome various challenges such as competition, finding product-market fit, and acquiring customers.
The most profitable online businesses tend to include affiliate marketing, drop shipping, web design, and freelance writing. This is because these industries have little to no startup and maintenance costs, so most of the money you bring in would be profit.
The cheapest type of business to start is usually a sole proprietorship, though this can vary from state to state. As for the cheapest industry, any service-based industry where you are the sole employee and you do not need to invest in equipment or materials up front to perform the service will generally be cheaper than a retail or service business that requires tools and employees.
The advent of online business has made it easier than ever to start a company, but there are still plenty of pitfalls if you aren’t looking out. At Wyoming LLC Attorney, we’ve been helping people like you start online businesses for years.
Our experienced business law attorneys can guide you through the process of company formation and help you choose the business structure that makes the most sense for you. We also offer registered agent, virtual office, and mail forwarding and scanning services that can help you maintain your privacy and start your company faster.
Looking to start your online business soon?