Offering something unique
Niche markets are often the products of inspiration. An idea pops into your head about something unique or a twist on something that’s been around for years. A case in point is the skin-care industry. Recently, this well-entrenched industry has been rocked by products with natural ingredients. Phthalates and parabens are out; fruits, veggies, and botanicals are in. The shift in demand for natural skin-care products created an opening in a very crowded market, allowing small business to make a big mark.
You can’t force an idea to pop into your head, but you can create fertile ground from which unique ideas are more likely to sprout. Here are a couple methods to try:
Immerse yourself in the industry or the market you’re passionate about. The more information and insight you have, the more material your subconscious mind has to work with to generate ideas.
Tune in to the news, and be sensitive to growing trends. Ideas for natural skin-care products, for example, came from concerns about potentially harmful chemicals in foods and other products.
Broaden your interests; expand your mind. Ideas for unique businesses, products, and services are often the product of diversity or convergence — viewing something from a different perspective or looking at two distinct industries or markets side by side.
Formalizing Your Brand As a Business … If You Haven’t Already
When you’re building and launching a brand, you’re typically building and launching a business — a complex topic that I don’t want to subject you to. But you do need to know the basics so that you start your brand/business on the right foot, avoid legal and tax issues, and ensure that your brand and other intellectual property is protected.
In this section, I explain the basics of incorporating and registering your business, and I touch on the topic of protecting your brand and other intellectual property (a topic you can find more about in Chapter 19).
Incorporating your business
Incorporating your business is the process of establishing it as an entity separate from you as a person. As a corporation, your business gains certain benefits, including legal protections and potential tax benefits. From a branding perspective, incorporating your business may help build trust and credibility among prospective customers and clients.
When incorporating a business, you decide how to structure it — as a partnership, limited liability company (LLC), C corporation, or S corporation. If you are your business (you’re self-employed), your business is considered to be a sole proprietorship, and you stand to miss out on the benefits provided to corporations.
In the following sections, I weigh the pros and cons of each type of business entity.
Sole proprietorship
A sole proprietorship is the fastest, easiest, and cheapest business structure to set up, requiring no time, effort, or money. You just start doing business, and your business is considered to be a sole proprietorship. With a sole proprietorship, you have complete control of all business decisions, and you report your income (and are taxed) as an individual taxpayer. Those are the benefits. These are the potential drawbacks:
Unlimited personal liability: This one’s the biggie. Nothing separates you from your business, so you’re personally responsible whenever something bad happens. If your business fails or someone wins a lawsuit against your business, you can lose everything, including your home and personal possessions.
Difficulty raising money to grow your business: You can’t sell stock in the business, and banks will be reluctant to loan you money.
Increased burden of running the business: With total control comes total responsibility, which can leave you feeling the heat when problems arise.
As a sole proprietor, you’re not required to name the business after yourself. You can register your business under a doing business as (DBA) name. As a DBA, you gain no legal protection, but you appear to the world to be more of a business entity. See “Registering your business” later in this chapter for details.
https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.
Partnership
If you co-own a business, consider forming a partnership. With a partnership, profits and losses pass through to the personal tax returns of the partners (so the partnership itself isn’t taxed). When forming a partnership, you have two options:
Limited partnership (LP) has one general partner with unlimited liability, who has more control in the business and must pay self-employment tax, and one or more partners with limited liability and control, who aren’t required to pay self-employment tax, as specified in the partnership agreement.
Limited liability partnership (LLP) is similar to an LP but provides limited liability to all partners.
Limited liability company
An LLC offers two key benefits:
Protection against personal liability that would otherwise expose your personal assets to risk.
Pass-through of profits and losses to your personal income tax return so that the LLC itself isn’t subject to corporate taxes. Members of an LLC, however, like sole proprietors, are considered to be self-employed and are subject to self-employment taxes (Social Security and Medicare).
If you have significant personal assets and are doing any risky business (anything that could expose you to costly lawsuits or bankruptcy), I encourage you to do business as an LLC or as an S or C corporation, which are covered next.
C corporation
