How Does a Business Operate: Everything You Need To Know

Each company can establish its own policies and procedures for operation in a document such as bylaws which is in accordance with local, state, and federal law.3 min read

How does a business operate? Each company can establish its own policies and procedures for operation in a document such as the bylaws, provided these rules are in accordance with local, state, and federal law.

Getting Started

As you start to build your business, initial key steps include:

  • Familiarizing yourself with the various laws and regulations that apply to your business, including tax and employment laws. It's important to understand the guidelines at the federal and state levels as well as specific laws in your municipality.
  • Obtaining the necessary business licenses and permits, which vary by location and industry but may include professional licenses, general business licenses, sales tax licenses, health permits, and/or zoning and land use permits.
  • Registering with the IRS for an employer identification number (EIN). If you are a sole proprietor with no employees, you can pay taxes and open a business bank account using your Social Security number. When you become an LLC or corporation, however, you need to file taxes with an EIN. This number is also used to open financial accounts and hire employees.

Creating an Operations Plan

An operations plan, sometimes called a business plan, provides a comprehensive blueprint for running your business. You may not think you need a plan, especially if your business is small, but having one helps ensure that you're moving in the right direction during the critical initial growth period. In addition, if you plan to seek loan financing or investor funding, you'll need to present a business plan to the decision-makers.

The operations plan contains the complete guidelines for running your business. This plan can start small and become more complex as your business grows. Some of the items that should be included in the plan include staffing information, production processes, equipment, technology, location, customer base, marketing plans, potential vendors and suppliers, and other industry-specific notes.

The operations plan should also appeal to investors if you plan to seek funding. For example, describe your chosen business location and the local demographics. What are the terms of your lease? What major equipment do you need to get started? If you're an online-only business, describe how you made that decision.