Introduction
Over the years, the American economy has thrived a lot due to the huge input that comes from the numerous small businesses operating in the country (Blackford 91). The number of small and medium enterprises in the United States has been on a steady rise since the turn of the century (Mann 180). A number of factors have contributed to this phenomenon, which has played a crucial role in strengthening the position of the country as an economic superpower. Some of these factors include prolonged political stability, an effective immigration system, good implementation of legislation and economic policies, as well as a development conscious society that encourages innovation (Robles 36). The United States ranks among the friendliest environments for starting a business across the world.
The federal government has developed a number of effective legislation that encourages people to start small businesses by offering a number of incentives, as well as an effective registration process that reduces the amount of time needed before the commencement of operations (Levinson 100). According to federal reports, small businesses in the country are owned by both Native Americans and non-U.S. citizens.
Entrepreneurship gurus argue that the kind of business environment available in a particular market plays a crucial role in determining the ability and willingness of people to run small and medium enterprises (Levinson 104). In addition, the legal issues surrounding the world of business also have a huge impact on the process of starting a business. In the United States, small businesses have a good record of accomplishment with regard to compliance with various legal provisions that guide their operations (Robles 43).
Discussion
A small business in the United States refers any enterprise that does not employ more than 500 personnel (Turner 23). A number of interesting statistics about the state of small businesses depict the dynamic nature of the entrepreneurship culture in the country. There are two categories of small businesses, namely employers and non-employers (Nazar par.2). Non-employers mainly constitute of enterprises run by self-employed individuals who do not engage the services of employees. Currently, there are more than 28 million registered and active small businesses in the United States (Turner 29). They employ more than 50% of the country’s working class.
Sole proprietorships constitute the highest number of small businesses in the country, while partnerships and corporations make up a very small number (Nazar par.2). However, the most challenging part about starting and operating a small business in the United States is the short lifespan. Although more than 500,000 small businesses are registered every month across the country, most of them do not survive past their second year of operation (Nazar par.2). Very few of them manage to remain in operation for a decade or more.
Some of the factors responsible for this phenomenon include low uptake of services offered by small businesses, high competition, changing dynamics of the business environment, high cost of operation and low income, as well as lack of mentorship (Blackford 98). Interestingly, federal reports indicate that more than 50% of small businesses in the United States are home-based (Nazar par.2). This phenomenon is highly attributable to factors such as high cost of operation, which makes it hard for businesses to stabilize in a highly competitive economic environment.
Steps for starting a small business
In order to run a successful business, effective planning, finding reliable financing and meeting all the legal requirements are very important in the United States (Blackford 106). Managing a business is a very dynamic process that requires a team of individuals who are very passionate about the activities of an entity, as well as have the eagerness to learn and a strong desire to conform to the necessary legislation (Mann 200). The first and most important step when starting a small business is writing a business plan.
This entails a detailed series of steps to be carried out and goals to be accomplished by a business once it becomes operational. A plan helps an entrepreneur to develop a map of the way business operations will be started, run, funded, managed, and assessed (Barreto 210). In order to develop an effective plan, it is important to conduct a thorough analysis of the target industry in order to establish crucial guiding elements such as the availability of a market, level of competition, consumer needs, and the necessary legal requirements (Mann 209).
The second step involves seeking assistance from established entities, as well as acquiring the necessary training for running the business. This mainly entails engaging the services of a business mentor who provides crucial advice with regard to crucial dynamics of the business world such as ways of getting reliable funding, strategies for expansion, relocating an established entity, and working with an approved business plan (Levinson 267). According to entrepreneurship experts, having a mentor plays a crucial role in increasing the chances of a small business in the United States achieving prolonged success and competitiveness.
The third step involves finding a good location for the business. Using all the knowledge acquired from a mentor and trainings, finding a location that has business friendly legislation on zoning, environmental management, and other legal requirements are very important (Turner 60). In addition, the location should be customer friendly in terms of accessibility and general attractiveness depending on the nature of services offered by the business (Barreto 219). The success of a business depends a lot on its location because it determines the ability of customers to see it, access its services, and give a first time impression of its target group (Mann 224).
The fourth step entails financing the business operations. Financing is a very crucial element of business dynamics that cannot be easily overlooked. In order to increase the chances of a small business stabilizing within the first few months of becoming operational in the United States, having a reliable and friendly financial plan is crucial (Robles 81). Entrepreneurs can finance their businesses through government loans, venture capitalism, grants, savings, as well as support from friends and family (Levinson 290). Importantly, new business owners should ensure that their choice of financing ensures enough time for the business to pick up, as well as the right to retain ownership. Ownership issues arise a lot with businesses that use venture capital as their source of financing (Barreto 228).
The fifth step involves determining the legal structure of the business. In the United States, small businesses belong to five legal structures, namely sole proprietorship, partnership, Limited Liability Company, corporation, and nonprofit (Barreto 247). A sole proprietorship entails an unincorporated business owned by a single person who is responsible for its liabilities and entitled to its profits. The federal government requires all businesses to identify their legal structure for the sake of paying taxes and solving other legal issues that tag along the element.
The sixth step entails creating a business name and using it to register with one’s respective state government (Barreto 261). This step is very crucial because it helps to give a business its identity, learn the importance of having an identification number from Internal Revenue Service (IRS) for taxation purposes, and registering with a revenue agency within the state that the business will have its operations (Mann 301). The seventh step entails registering the business with the state and local taxation authorities. This is when a business is issued with a tax identification number. This number allows the government to tax the revenue of the employees working at the business (Mann 305).
The eighth step involves a business obtaining the necessary licenses and permits required before becoming operational (Turner 118). The federal, state, and local governments offer several types of licenses and permits to businesses depending on their nature of operations. For example, businesses involved in manufacturing and production activities get a permit to begin their operations when they show the way they plan to manage their waste and regulate the level of negative impacts on their surrounding environment. Licenses and permits are very important elements in business dynamics whose role helps in ensuring that new businesses do not compromise the ability of people around it location to meet their immediate needs and lower their quality of life (Robles 102).
The final step involves understanding the various responsibilities of an employer towards his or her employees as stipulated in the labor laws. Some of the elements that a business owner ought to be conversant with include the legal steps taken in hiring and firing employees, the minimum wage laws, the ethical obligation of providing a safe workplace environment, as well as the employee right to become a member of labor unions (Turner 270). According to business development experts, people planning to start a small business in the United States should understand the strong labor laws in the country because it will save them a lot of money in terms of legal suits and compensation plans (Levinson 316). They further argue that lack of awareness with regard to employment laws in the country has been a major factor that leads to most small businesses being out of operation within one or two years after starting.
Conclusion
Over the years, the business environment in the United States has experienced a number of changes that have led to an increase in the number of small businesses. These entities do not have a workforce of more than 500 people. The stable political, economic, and legal environment in the country has attracted both native and foreign entrepreneurs into the American economy as small business owners. Most of the small businesses are home-based, online entities, nonprofits organizations, sole proprietorships, and partnerships.
One of the most important things to consider when starting a small business in the united states include the location, source of financing, nature of business, and compliance with the legal requirements. Due to the dynamic nature of the contemporary business world, small business owners should come up with strategies for getting a reliable source of financing and cost-cutting measures in order to give the business a longer lifespan.
Works Cited
Barreto, Hector. The Engine of America: The Secrets to Small Business Success from Entrepreneurs who have Made It. New York: John Wiley & Sons, 2007. Print.
Blackford, Mansel. A History of Small Business in America. New York: UNC Press Books, 2003. Print.
Levinson, Marc. The Great A&P and the Struggle for Small Businesses in America. New York: Farrar, Straus, and Giroux, 2012. Print.
Mann, Philip. Small Business Entrepreneurship. California: Archway Publishing, 2014. Print.
Nazar, Jason. 16 Surprising Statistics about Small Businesses. Web.
Robles, Fernando. Business in Emerging Latin America. New York: Routledge, 2014. Print.
Turner, Marcia. The Unofficial Guide to Starting a Small Business. New York: John Wiley & Sons, 2011. Print.