Good for you! Owning your own business means that you have more control over your destiny, you can take pride in owning something that’s entirely yours, and you can finally answer your Uncle Joe’s long stated assertion that you “will never amount to anything” with a resounding, “Yes, I will!”
Hold on there. Have you considered all the little details necessary to succeed? Some very basic decisions you will make at the beginning of your journey to business ownership. Here are a few helpful tips.
While it may sound good to be a “sole proprietor” you absolutely want to protect yourself and your personal assets by choosing a business structure that allows you to do just that. That means deciding whether to file as a LLC (Limited Liability Corporation) or an “S” Corporation.
There are similarities between the two. Both are separate legal entities created by filing with your state, both protect you from being personally responsible for the business’ debts and liabilities, and as long as there is only one owner, business profits or losses are passed on to the owner’s personal tax return.
The differences between the two entities mostly have to do with who can own the company and how many owners the company can have. LLCs have the advantage of allowing for an unlimited number of subsidiaries.
The Business Plan
Today you are in New York City and at 11 am you decide to take a road trip to Los Angeles, so you get into your car and start driving. Would you do that? Would you start a long trip driving without a map, a few bucks in your pocket, a plan of some sort? Of course not!
Your business plan may be the most important document you ever write. Even if you plan to self-fund your business, and regardless of whether you’ve come up with the best mousetrap ever invented, you still need a roadmap to reach success.
There are plenty of resources available to help you create an effective business plan. Make sure you demonstrate that you know your market, fully describe your business and your own expertise, and predict various scenarios for the growth of the company. After the creation of your plan, the second most important thing to do is get a new set of eyes to look it over. An independent reviewer with no vested interest in your business’ success will be able to take a clear look at your financial projections and assumptions and correct your preconceived notions. This is critical if you are seeking outside funding for your business.
Those pesky little details
Next you have a list of small chores that will finally allow you to start working. After you receive your LLC or S Corporation documents from your state you will need a Federal tax ID – and perhaps a state tax number, depending upon your business and state laws – to be able to get a business checking account. While you are at the bank also request a business credit or debit card. It’s essential to keep business and personal expenditures separate for accounting purposes, or you may be wading through many months of paperwork at the end of the year trying to figure out whether you can legitimately claim various expenses.
If they really like you at the bank they may even offer you a credit line for your business. Take it, even though you can’t imagine using it. You never know when you might need it.
Meanwhile, back in your office …
Make a budget that’s as airtight as possible and resolve to stick to it. Using QuickBooks will make your life a lot simpler, especially when it’s time to hand over your end-of-the-year financials to your tax professional. The software will also help with producing formal financial statements that are imperative when you are presenting the particulars of your company to potential investors and customers, and especially banks. Even if your financials are entirely for internal use, if you start out scrupulously organized and stay that way it will significantly reduce headaches later.
Now, get to work!
It’s time to start marketing your company by telling everyone you know about what you are doing. Attend networking events and join groups, both in your local market and online, especially on LinkedIn. And if you can squeeze out a bit of capital from your budget, hire professionals to create a website and establish a presence on social media for your company. GOOD LUCK!
Are you starting a new business? Get expert financial and management advice from Neil during a free, no-obligation consult. Call Neil Miller Consulting at 917.974.6651 or email email@example.com