Small business ideas can easily be cultivated into a blossoming business over time. The inspiration for a business idea is half of the success. The other half comes from an effective business plan and budget.
For most Americans, business ideas are born out of their skills or hobbies. Some of these can lead to home-based businesses, but others require a professional space.
Funding a business can often be an issue because some ideas require more capital than others, and loans should only be considered as a last resort. Investors and crowdfunding can help raise money, and many budding business people start by pursuing their dream as a side hustle until they raise the capital to grow their business.
Popular business ideas in 2020
Demand for freelancing services, cleaning services, fast food and various forms of home care is rising. Here are some of the most popular business ideas in 2020.
Transcriptions, blog writing, copywriting, and translation services are all in demand right now. These occupations need the least capital outlay as all that is needed is a computer, software, and a comfortable space to work from.
Digital marketing and graphic design
Business owners struggle to make time for their ever-important marketing campaigns. Maintaining an in-house team is expensive, a luxury only larger companies can afford, meaning that small and medium enterprises prefer to outsource their digital marketing. These companies also need promotional material, and the services of graphic designers are vital to them.
Family, pet, and home care
There are many business opportunities in this market. Long hours at work and the demand of family leave the majority of Americans scant time to organize their home, maintain their garden, care for their pets, or clean their homes. Another worry for most people is the care of their aging parents who may need in-home care.
These areas all present many interesting business ideas, whether it is home organization and cleaning services, gardening services, pet sitting, and home care for the aged (the world’s population is aging).
The food business is always in demand, and a growing trend is to establish a food truck that can travel to events.
Other popular business ideas in 2020 include real-estate agents, printing businesses (especially t-shirts and gifts), and drop shipping.
What do you need to start a small business?
Developing a small business is easy if all the potential challenges are taken into consideration. Initially, a business plan is vital. An analysis of the consumer base, market, and raising of capital (if needed) must be included in the planning. The budget of a business will depend on if it needs suitable office space and equipment.
Marketing a small business is important and will entail choosing a catchy name, creating a website, and getting a domain. Once these steps are completed, some thought needs to be given to the business formation before it is registered. The business formation is important because it has implications on the way the business is taxed and on the personal liability of the owner.
Once the formation is decided and the business is registered with the state, the acquisition of an Employer Insurance Number (EIN) allows the business owner to employ people, and get a business account.
Since business formation is important, a new business owner needs to consider the following.
Sole Proprietorship VS LLC
For many new business owners, the first thought may be to start a sole proprietorship. However, if they ask their attorneys, accountants or business friends for advice, they will be able to see the logic behind the clear winner in a debate between sole proprietorship vs LLC.
Comparison between the benefits of LLC vs sole proprietorship:
Liability protection: This is the most important difference between the two because a sole proprietor has no liability protection. This means that if the business owes money or is sued, the owner is personally responsible.
Brand name: Owners of LLCs can use the legal name of their business as the brand name, but sole proprietors must use their surname as the business name. In some states, sole proprietors can register a DBA (doing business as) name.
Pass-through-taxation: When comparing taxation for a sole proprietor vs LLC, both types of entities are taxed the same by the IRS. Profits are passed on to the personal taxes of members, and they are only taxed once. However, LLC business owners do have more tax customization options.
Registration and maintenance costs: If a sole proprietorship has a DBA, then registering it costs almost the same as registering an LLC and they both have low maintenance costs.
EIN requirements: An EIN is required if a business needs to open a bank account and hire employees, whether it is a sole proprietorship or LLC. The EIN is issued for free directly from the IRS.
Final opinion on LLC vs sole proprietorship
Starting a sole proprietorship is very easy because no time or money needs to be spent to form a business, but can prove costly in the long run. This type of business formation is only ideal for small-scale businesses that are at low-risk of financial losses because the owners have no personal liability protection. Sole proprietorships also have less credibility and fewer branding opportunities.
LLC formations are better for businesses with a larger customer base or those that have the potential to start making a profit immediately. They can benefit from unique tax options. Some types of businesses have an increased risk of loss or liability, and an LLC protects them best.
Businesses that are started as sole proprietorships can be formed as LLCs whenever they are ready. This is usually when the business starts growing and is turning a profit.