What you need to know before you start a company

Starting a business is a very serious topic and some decisions that will need to be made require tedious research.  For example, deciding to incorporate as a limited liability
corporation or a sole proprietorship could have profound financial implications.  According to wikipedia, a sole proprietorship is a type of business entity that is owned and run by one individual.  The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts.  On the other hand, LLCs provide business owners with liability protection. 

There are a large amount of resources available on the internet, but always evaluate if it is accurate and trustworthy. 

To have a business that not only survives a long period of time, but is successful and profitable,you need to make informed decisions and plan your tasks well in advance.  Where you get your information from and who you seek advice from will determine if you succeed or fail.  Even the greatest idea in the world won't succeed with poor management and planning. 

A lot of people that want to learn more about a topic will search for it online.  This enthusiasm is great, but be careful what you read on the internet.  Use your common sense and whenever in doubt, look for a second opinion or ask an expert.

There are many reasons why a business does not survive, but a large number of problems can be avoided with the correct filters in place so that you do not waste time or are mislead by inaccurate information. 

The term filter failure is used by Clay Shirky, who in September of 2008 spoke at the Web 2.0 expo in New York on the topic of information in today's society.  He presented an argument that placed the blame on filter failure as a contributor towards some of our societies problems instead of information overload. 

Information overload is the state in which an individual is overwhelmed with information and has impaired decision making abilities.  It is an ancient problem that has been around since the printing press was introduced which allowed the production of large volumes of information.  The average person had access to more literature than they could read in a lifetime.  Because the publishers had all the financial risk, they were given the responsibility to only publish high quality material.  This economic force kept quality high.

The newest problem we face today is filter failure, which is the failure of the systems that are meant to block low quality or incorrect information.

listen to ‘Information Overload Filture Failure 2’ on Audioboo

The internet has reduced the cost to spread information online and now the quality of much of that information is lacking.  In the case of the internet, there is no person responsible to filter information on the internet
for quality.

listen to ‘Information Overload Filture Failure’ on Audioboo

After you have started your business, you need to plan for the future by setting goals.  A common goal is to have reached a certain milestone in sales or employees.  To keep your business alive, stay in touch with the newest strategies in your field.

The idea of filter failure which Clay Shirky talks about is applicable to keeping your business alive.  Your time management will determine how much you can get done.  Figure 1 shows that only about 30% of businesses are still alive ten years after they were created.  To avoid being one of them, use the strategies above to stay on top of the game. 

Figure 1

The University of Maryland at College Park has several valuable organizations available for student entrepreneurs.  

Especially if your major is in science or engineering, you may not have any experience with the legal side of business and the ways businesses are taxed.  The organizations below can provide assistance in these areas. 


Mtech's Biotechnology Research and Education Program
Dingman Center for Entrepreneurship
Maryland Biotechnology Center

One of the best websites to get information about small businesses is The U.S. Small Business Administration at www.sba.gov/

In business, a license will typically be an agreement that allows a business to sell a product that would otherwise be protected.  A government agency like The National Institutes of Health (NIH), "the primary agency of the United States government responsible for biomedical and health-related research," will frequently license their inventions to businesses. 

Chanda Arya and Kevin Diehn are graduate students at the University of Maryland and have started a business in biotechnology. They talk about their experience using the three organization mentioned above. They are a wonderful example of a couple who had a major that was really far removed from business.  The are on a successful path forward thanks to Mtech, the Dingman Center, and Maryland Biotechnology Center. 

One of the Most Important skills you need is to be able to plan your tasks well in advance in order to anticipate problems. 

This number of things to do before even a small business opens is bewildering.  As always, break down large tasks into smaller tasks.  Plan each step and give it a deadline.  If you get behind on your tasks, some future tasks may need to be delayed, so keep this in consideration.  


If you are the only one in your business, your best option may be sole proprietor.  If you have a partner, your best option may be LLC because it can give you protection from financial responsibility.  As stated in the introduction, this decision is very important and the correct decision depends on financial considerations.  For advice on your specific situation, ask an expert.  You need to file paperwork to officially form your business.   Research you business idea to make sure it will be commercially viable.  It is extremely important for you to check for government regulations that you have to comply with.  There are very bad consequences and fines if you do not meet government regulations.  According to figure 2, this is the most important problem facing small businesses today. 

Figure 2 

From: Time Line for Starting a Business
Contributed by Small Business Forum, Winter 1990 and Janet Attard, author of "The Home Office and Small Business Answer Book"


Create a business plan which explains your business' goals and overall plan.  You business plan is very important because it is what can help you gain investors.  Obtain a license to your product.  Decide on the most significant expenses.  Consider including equipment, insurance, consider hiring employees, renting office space and advertising.  Also consider meeting with an attorney, Certified Public Accountant, consultant and a bank.