Introduction

It’s a great time to be a data-centric entrepreneur in the State of Virginia. The Commonwealth has consistently ranked as a top state for business in the U.S. by CNBC^[1] and as of 2019, approximately 725,000 small businesses were operating in the state. The State’s diverse geographic regions provide businesses with numerous niche opportunities, including defense contracting, agriculture, logistics, tourism, technology, data storage and analytics, aerospace, and manufacturing.^[2]

When you consider the number of state and regional resources that stand ready to support data entrepreneurs and tech startups, it’s no wonder that so many companies like yours have chosen to do business in the Commonwealth. Virginia is America’s East Coast Tech Hub.

At the Virginia SmallSatellite Data Consortium (VSDC), our goals are to help grow Virginia’s data-market capacity and to build on our state’s rich history of innovation. This Business Creation Guide provides a framework for aspiring business owners to develop, sustain, and grow data-driven small businesses and partnerships for the public good. Recognizing that the numerous steps required to start a new business can appear daunting, we’ve designed this Guide to help you navigate the process in 10 simple steps.

The information provided in this guide is broad in nature, and is not intended to be a substitute for professional tax, insurance, or legal advice. All information, content, and materials provided in the guide are for general informational purposes only.

1.    Plan Ahead

Advisors

Your company will benefit from expert advice. Assembling a formal or informal advisory board of trusted resources who can help with networking, banking, accounting, insurance, tax, and legal concerns can be extremely helpful as you’re starting your business and beyond. They can answer questions, provide advice as your business grows, and help you avoid costly mistakes. Some startups utilize regional incubators and accelerators, others prefer to assemble a private network of individuals who are already successful entrepreneurs, persuasive business developers, and technical experts in particular fields.

As you’re conceptualizing your business, there are a number of organizations that you can lean on for support.  For a list of select Virginia startup, veteran, and entrepreneurial resources by region, see Appendix A.

Business Plan

A business plan is the blueprint for your business. Though creating a formal business plan isn’t required, we recommend that you create one, especially if you need to obtain funding, or if you plan to bring new partners on board. A well-written plan can give your company added legitimacy and has the potential to instill confidence in investors.

Though every business plan is different, each generally contains standard components such as: Executive summary, market analysis, description of operations and management, and financial statements.

Not sure where to start? The Small Business Administration (SBA) has a wealth of resources that practically walk you through the process; they even have business plan templates. See: Write Your Business Plan.  A formal business plan isn’t really what you need?  Here is a great article from Investintech.com on 6 Innovative Alternatives To The Traditional Business Plan.

Funding

Every business will need capital to succeed and yours is no different.  Your choices on how to obtain funding are vast and include: Bootstrapping, crowdfunding, angel investors, venture capitalists, and funding from business incubator and accelerator partners, among others.  For more information on funding options, check out the following articles:

• 10 Funding Options to Raise Startup Capital
• 6 Easy Ways to Raise Capital For Your Business
• The Basics of Raising Capital for a Startup

2.    Select a Business Location

Where are the majority of your current or future customers?  Does a physical business location even matter for your business?   Selecting a business location can be a key first step and has the potential to make a substantial impact on your business’ success.  As you’re choosing a home for your business, consider the following:

• Proximity to Your Customers – If your potential customers are primarily in urban environments, for example, that’s where your business should be. Ever Google for a business ‘near you’?  Location matters.  The easier it is to find your business and the closer it is to your customers, the better.
• Professional Appearance – If your business could benefit from having a physical location, choose one wisely. First impressions are everything. What do you want potential customers or business partners to find when they Google your business? Your house, garage, or a professional business address? What do you want them to see when they visit? What about potential employees or business partners?
• Cost Effective – Do you need an office suite or even an office to start?
  • Co-working Spaces – Many will allow you to register your business with a simple mailbox subscription and will give you the option to rent business-critical spaces like conference rooms and shared and dedicated desks which are a fraction of the coast of an office or an office suite.
  • Incubators – Is there a business incubator that is aligned with your company’s product or service? If so, you may be able to locate your company in the incubator at a lower cost while you’re scaling.  Here is a good list of startup accelerators and business incubators in the State of Virginia provided by Ideagist.
• Scalable – Select a location that has the capability to scale with your business. Today you may only need a mailbox, but tomorrow you may need an office, a lab, or multiple desks for your employees.

3.    Decide on a Legal Structure

Now that you’ve decided where your business will be located, it’s time to decide on a legal structure it will affect how much you pay in taxes, your ability to raise money, the paperwork you’ll need to file, and your personal liability. Choose carefully and consult with your professional network of business counselors, attorneys, and accountants.

Note that while you may convert to a different business structure in the future, a change may result in tax consequences and unintended dissolution, among other complications.[i]

Though Limited Liability Companies and Corporations are the most common, below are some of your other choices in order of complexity.

• Sole Proprietorship – If you’re doing business on your own without incorporating, you’re automatically seen as a Sole Proprietorship. Since it’s an informal structure, there is no need to file anything with the state unless you file for a “doing business as” (DBA) name, which allows you to operate under a name aside from your own legal name. The main problem with this structure is that nothing is shielding you from business liability.
• Partnership – Another informal business structure, a Partnership is an unincorporated business with multiple owners. Like Sole Proprietorships, Partnerships offer no personal liability protection but do offer flexibility in terms of registration.
• Limited Liability Company (LLC) – LLCs are the most popular because they allow entrepreneurs to enjoy the protection of a corporation without the double taxation. Plus, you’re able to select whether you want to be treated as a Corporation, Partnership or Sole Proprietorship for federal tax purposes.
• Corporation – Generally, this is the business structure of choice by large companies such as Apple. There are several types of Corporations to choose from (S Corporation, C Corporation, B Corporation, etc.), each with its own advantages and disadvantages. The benefits of starting a Corporation are personal liability protection and potential tax benefits.[ii]

To obtain more information on the different types of business structures, and to explore which might be the best fit for your business, check out this great link from NOLO: Choosing the Best Ownership Structure for your business. In addition, the SBA’s Launch Your Business site contains a wealth of information on business structures.

4.    Choose a Name

Naming your company is an early part of the branding process. It communicates your mission, and it serves as the ‘visual voice’ of your company. It should be easy to remember, and it will eventually have to play well with your company’s logo, slogans, and taglines. Here are some things to keep in mind:

• Choose a business name that reflects your brand identity and doesn’t clash with the types of goods and services you offer.
• Sole Proprietorship or Partnership – If you use a business name that is different from the legal name of the business owner (for a sole proprietorship) or last names of the individual partners (for a partnership) must register a Certificate of Assumed or Fictitious Namewith the Virginia State Corporation Commission (SCC) in the county where you do business.
• LLCs and Corporations – You will need to check that your name is distinguishable from the names of other business entities already on file with the Virginia SCC. You can check for available names by doing a  business entity searchon the SCC website.
• Doing business online? You may want to register your business name in order to use it as a domain name. See NOLO’s Choose and Register a Domain Namefor more information.
• Avoid trademark infringement issues – Do a federal and state trademark check to make sure the name you want to use is not the same as, or too similar, to a name already in use. See NOLO’s How to Do a Trademark Searchfor more information.[iii]

5.    Register Your Business as an LLC or a Corporation

Though we’ve discussed Sole Proprietorships and Partnerships (informal business structures), in the section above, here we’ll focus on the two most common business legal structures:

• Limited Liability Company
• Corporation

No matter the formal business structure you select, there are a few things you can expect during the formation process: Formally naming your business, choosing a registered agent, filing formation documents, and getting an Employer Identification Number (EIN). In addition, each business structure will have its own unique requirements.[3]

Starting an LLC

LLCs are the easiest business structure to form and maintain, requiring little paperwork and five easy steps that you can do yourself or with the help of a professional. Be sure to submit your Articles of Organization for an LLC in Virginia online or by mail (including the $100 filing fee).

Here is how to form an LLC in Virginia:

1. Name your Virginia LLC
2. Choose a registered agent
3. File your LLC with the State
4. Create an LLC operating agreement
5. Get an EIN

For more info, read Startup Savant’s full guide on How to Form an LLC in Virginia or have a professional service form an LLC for you.

Forming a Corporation

Forming a corporation is a little more complicated than other business structures such as LLCs. However, for businesses that are well-suited to this business structure, the benefits are immense. If you’re ready to form a corporation, file the Articles of Incorporation for a Virginia corporation online, or by mail, along with a minimum filing fee of $25. You will also have to pay a Charter Fee based upon the number of shares your business will have:

• 1 million or fewer authorized shares: $50 for every 25,000 shares or fraction thereof.
• More than 1 million shares: $2,500.

Here are the four steps to form a corporation in Virginia:

1. Create a name for your Virginia corporation
2. Choose a Virginia registered agent
3. Choose your Virginia corporation’s initial Directors
4. File the Articles of Incorporation

Tax Implications of Location

Depending upon the size of your business, its structure, and myriad other factors, where you decide to incorporate can impact your tax and legal situation. Tax implications will change from one local to another and from state to state.  Additionally, depending on how you plan on funding your company or if you’re going to be seeking investors in the future, it may make sense to incorporate in Delaware, for example, then seek Foreign Entity qualification in Virginia.  Consult your legal advisors!  For more information see: Delaware Division of Corporations, Delaware.gov, and The Pros and Cons of Incorporating in Delaware.

For more info, read Startup Savant’s full guide on How to Start a Corporation in Virginia.

Foreign Entities

Already registered in another state or country is designated as a foreign business entity by the Commission and must qualify to conduct business in Virginia. You can file online through the Clerk’s Information System (CIS). For additional information see these links from the Virginia SCC: Foreign Business Entities, and Foreign Corporations.

6.    Obtain Permits and Licenses

A part of the startup process is obtaining the licenses, permits, and registrations required for your particular business legal structure. Many businesses require a combination of licenses and permits to comply with federal or state regulations. For example, if your startup is part of the Unmanned Aerial Vehicles (UAV)/Unmanned Aerial Systems (UAS) community, you’ll need to comply with Federal Aviation Administration (FAA) certification requirements for drone piloting.^[4]

Find what licenses your business needs by performing a business license search or by utilizing the following resources:

• Federal:Use the US Small Business Administration (SBA) guide.
• State:Use the Virginia Department of Professional and Occupational Regulation
• Local:Requirements for local permits and licenses vary from city to city and county to county.  For more information, contact your local county clerk and ask about local licenses and permits.[iv]

Professional and occupational licenses are specific to particular fields of work. Most licensing of this kind is handled through the Virginia Department of Professional and Occupational Regulation (DPOR). The DPOR website has sections listing various professional regulatory boards and regulated professions and occupations.[v]

7.    Accounting, Filing, and Reporting Taxes

Most small business owners utilize accounting software such as Quick Books Online, FreshBooks, Wave Accounting, Kashoo, Xero, etc. to manage their books.  The benefit of using such tools is that they commonly integrate your business data and allow you to connect it to your banking information and allow you to manage sales, monitor cash flow, track expenses, control payroll, run reports, and pay taxes all in one place.  Though these software tools cost money, their convenience and built-in business logic are a good value and can provide a piece of mind when starting out.

Here is an Investopedia list of 5 best accounting software package options.  This is not an exhaustive list, nor a recommendation, but it’s a good starting point.

Of course, the software tools mentioned above must be set up and maintained properly. We highly recommend that you work with an accountant who is familiar with the tool that you’ve chosen who can assist with setup, maintenance, and troubleshooting.

Whether or not you’ve chosen to manage your books and file your taxes using an accounting tool or if you’re inclined to manually report your state and federal taxes, please review the following information:

• Virginia taxes every kind of business. See NOLO’s Virginia State Business Income Taxfor more information on state business taxes in Virginia.
• Sole proprietorships –Pay state taxes on business income as part of their personal state income tax returns (Form 760).
• Partnerships –Partners pay state taxes on partnership income on personal tax returns. In addition, Virginia partnerships also must file Form 502, Pass-Through Entity Return of Income and Return of Nonresident Withholding Tax.
• LLCs –Members pay state taxes on their share of LLC income on personal tax returns. In addition, LLCs themselves have to file an additional state tax form. The specific form used will depend on how the LLC is classified for federal tax purposes. Virginia LLCs also are required to file an annual report (also known as an annual registration fee). See NOLO’s Virginia LLC Annual Filing Requirements for more information.
• Corporations – Shareholders must pay state taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on their personal state tax return. Moreover, the corporation itself is subject to Virginia corporation taxes. And, finally, corporations must file an annual reportwith the Virginia SCC.
• If you have employees, you must also deal with state employer taxes.
• And, apart from Virginia taxes, there are always federal income and employer taxes. Check IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a Business.

8.    Obtain Insurance

Business insurance can protect your company and your personal assets from the fallout of unexpected disasters, such as personal injury lawsuits or natural catastrophes. An insurance agent can help you explore the different coverage options for your business, which may include general liability insurance to protect you against claims relating to bodily injury or property damage, or cyber liability insurance to cover litigation and settlement fees should you experience a data security breach.

To learn more, see NOLO’s article, What Types of Insurances Does Your Small Business Need?

Drone-related businesses, for example, can have a unique risk profile. Risks are not limited to, but include:

• Liability risk
• Cybersecurity risk
• Data security and privacy issues
• International exposure

In addition, it is important to note that if your business is testing or operating drones in places outside of FAA jurisdiction, you’ll need to make sure that your insurance covers foreign operations.

The resources below provide insight into the issues surrounding data science and drone-oriented businesses. The information is valuable, but is general in nature and is not considered a substitute for professional advice. In addition, information relating to drone insurance is for educational purposes and not an endorsement of a specific broker or agency.

For a more in-depth treatment of legal concerns, see VSDC’s document Legal Frameworks for Novel Businesses.

9.    Open a Business Bank Account

Establishing a relationship with a bank early is key.  A good banker can open your business account and work with you on a line of credit if needed. Bankers can also serve as great network boosters as they have deep relationships inside the business community.

Virginia is home to many small but powerful, and well-connected local banks.  For more information on how to choose a business account, check out this Business News Daily article: How to Choose a Business Bank Account.

No matter the type of business you form, you should consider opening a separate business account to make it easier to track your income and expenses. For some business types, like LLCs and corporations, a separate bank account is necessary to maintain your liability protection. To learn more, see NOLO’s Opening a Business Bank Account.

10.                       Brand and Market Your Business

You’ve started your business and now you need to make sure that others can find you and are buying what you’re selling.  While there are a number of different ways to achieve this mission, below is a small, but essential, collection of marketing and branding-related topics that most business owners should take into consideration.

Branding

Branding your new business can be one of the most creative and rewarding aspects of entrepreneurship, but creating a brand identity is about much more than designing a logo or wordmark for your business cards and other collateral. Your brand identity is the public face of your company; it’s a cohesive system that helps to differentiate you from your competitors, express your values, and it connects you with your markets. Your branding should remain consistent across all of your communications channels: website, social media, packaging, print and digital media, advertising, trade show collateral.

Creating a brand strategy can be rewarding but time-consuming when done well. Consider engaging the services of a branding and design professional to collaborate with you. For more on brand identity systems and why you need one, explore this engaging article from foundr: Branding Must-Haves That Don’t Occur to Startups Until It’s Too Late.

Marketing

A marketing strategy refers to a business’ overall game plan for reaching prospective consumers and turning them into customers of their products or services. A marketing strategy contains the company’s value proposition, key brand messaging, data on target customer demographics, and other high-level elements.

Whether your product or service is B2B (Business-to-Business) or B2C (Business-to-Consumer) you’ll need to craft a marketing plan. Elements of a marketing plan or strategy include: Market research, identifying your target market, performing a competitive analysis, creating a marketing budget and sales goals. Once your marketing strategy is in place, data analytics can help you determine what’s working and what isn’t.

Marketing is a very specific area of expertise. You may want to consider bringing a specialist on board to help you create a strategy that meets your needs. Here are two resources to help you start the conversation from Entrepreneur Magazine, 5 Steps to Create a Marketing Plan, and from Business.com, A Killer Marketing Plan for Startup Entrepreneurs.

Website

After establishing your brand and creating your logo the next step in the branding process is to create a website for your business.  Not long ago, a professional website was only possible with the help of professional web-developers and designers; that is no longer the case.  Web technology has advanced to the point where it’s entirely possible for entrepreneurs to create an attractive and well-functioning website using a number of web building tools and platforms.

Website builder tools like the GoDaddy, Squarespace, Webflow, and Wix have made creating a basic website a relatively simple process.  For a comparison of best website builders, check out the recent assessment table provided by Truit.

Please note, while appropriate for some businesses, social media accounts like Facebook, LinkedIn, and Instagram are not replacements for a business website.

Google

Last, but not least, Google.  Ever since the introduction of Google Search in 1997, the worldwide market share of all search engines has been rather lopsided. Google has dominated the search engine market, maintaining a 92.05 percent market share as of February 2021.[vi]

In other words, if you want others to find your business, you must be easily found on Google.  For more information on how to list your business on Google, check out the Google My Business page.

Search Engine Optimization (SEO)

SEO is about helping search engines understand, rank, and present content.  Knowing how to optimize your website is, therefore, crucial to ensuring that your business is found online.

Though your website may be smaller or larger than other sites and it may offer vastly different content, common optimization techniques should apply to sites of all sizes and types.  SEO is often about making small modifications to parts of your website. When viewed individually, these changes might seem like incremental improvements, but when combined with other optimizations, they could have a noticeable impact on your site’s user experience and performance in organic search results.[vii] For more information check out Google’s Search Engine Optimization (SEO) Starter Guide.

 

 

[1] Virginia Economic Development Partnership, vedp.org

[2] https://www.businessnewsdaily.com/9707-doing-business-in-virginia.html

[3] https://startupsavant.com/how-to-start-a-business-in-virginia

[4] https://www.faa.gov/uas/

[i] https://www.sba.gov/business-guide/launch-your-business/choose-business-structure

[ii] https://startupsavant.com/how-to-start-a-business-in-virginia

[iii] https://www.nolo.com/legal-encyclopedia/start-own-business-virginia-seven-steps-need-take.html

[iv] https://howtostartanllc.com/start-a-business-in-virginia#permits

[v] https://www.nolo.com/legal-encyclopedia/start-own-business-virginia-seven-steps-need-take.html

[vi] https://www.statista.com/statistics/216573/worldwide-market-share-of-search-engines/#:~:text=Ever%20since%20the%20introduction%20of,share%20as%20of%20February%202021.

[vii] https://developers.google.com/search/docs/beginner/seo-starter-guide