Business ownership is a dream for many enterprising individuals. Opening the doors of your own startup to serve your community is a singular feeling of accomplishment. Before you unlock the front doors, put a down payment on a building or even write your business plan, however, there are some key considerations to make regarding your business.
The quickest way for a promising enterprise to fail is to rush into the process without a well-constructed plan. You need to know what type of business entity your venture will be. You need to know how it will be structured, plan your tax strategies, be prepared for business and commercial transactions and many more factors.
Laying a foundation: choosing a business entity
Starting a business entails much more than signing a few documents and writing a few checks. Careful planning is critical, but it doesn’t have to be intimidating. You will most likely be working with a business attorney as you set the groundwork for your startup. Be sure to consider what type of business best fits your needs.
Limited liability companies (LLCs), partnerships, limited partnerships, corporations and sole proprietorships are a few of your options. They all come with different benefits, handle their taxes differently and provide you with different options for future growth.
An LLC, for example, provides considerable protection to your assets. As an owner, creditors won’t be able to pursue your personal property (your home, personal savings accounts, etc.) should things go wrong. Alternatively, a sole proprietorship is extremely cost effective, require no corporate taxes and allows you complete freedom of operation.
Next steps: preparing for commercial transactions
Once you have a firm grasp on which type of business entity fits your needs, you will need to plan your transactions. Business transactions big and small will be an almost daily part of your job as a business owner. Being educated on conducting them and having a support structure to help you navigate the complexities is a must.
A few important considerations to make regarding your business transactions are:
- Will you be buying or leasing your business’ space?
- Will you be hiring employees or contracted help?
- Will you need financing from a bank or other lender?
Even these most basic of transactions are large questions that come with many follow up questions. Business laws are complicated, and often hinge on knowledge of esoteric codes and forms. Don’t face them alone.
Many people with dreams of running their own business fall short. If you have the drive necessary to be a business owner, take the extra time to lay the groundwork. It could be the difference between becoming a success and drawing the shutters.