A good logo is a visual representation of the function as well as the overall image of your company. Because of this, the form of the logo is highly dependent upon the type of business for which it is used. For example, a firm involved in cutting-edge technology may best be served by having a sleek, modern-looking logo with an emphasis on simple, abstract shapes, while a local business with a more homegrown attitude might have a more organic and complex logo incorporating elements of folk art. The aesthetic you choose informs all of the decisions you make in creating a logo.
The basic form of the logo needs to center around one image or shape. This central form can be a combination of simple shapes or images, but to really work as a logo it needs to be visually cohesive as a single unit. Try to use a central form that has a connection to your company, even if in a symbolic way. For example, a travel company might employ a generally circular logo, which is suggestive of a globe regardless of what fills that circle.
Unless specific colors are desired beforehand, decide upon a color scheme for the logo after designing the basic form. Often, it is helpful to re-draw the same design using different color schemes (or the same colors in different configurations) so as to be able to visually compare them and determine which one looks best. Use two to five colors for the color scheme in most logos; the colors need to be distinct enough from one another to be easily identifiable; if the colors are too similar, the logo may wind up looking muddy. Try to minimize the number of colors that are essential to the logo, as each additional color you use adds to your company's costs in printing materials.
While designing your logo, periodically step back from your work and view it at a distance. The logo must be recognizable from far away to be effective, as many of your companies customers may see it at a distance.
Design a logo at a large scale and high resolution (if using a raster graphics program) or in a vector graphics program, so that size is not be an issue when placing the logo on company materials later on. It is much easier to get a good result by shrinking an image than by enlarging it, so try to draw it bigger than you are ever going to need.
Check to make sure that your logo is still recognizable when reduced to black and white. Some of your company's materials may be printed in black and white or even simply photocopied, and you want your logo to retain legibility in those circumstances.