Is Starting a Business Your New Year's Resolution?

Planning for your own business

Before you start your own business or buy an existing business, you should do some initial planning. You may have already decided what type of business you want--your own restaurant, retail outlet, service, or all of the above. You need to choose a suitable location--can you work from home, or do you need a separate facility? You should assess your financial requirements, schedule daily activities, and plan for contingencies, which may be included in your business plan. Planning your business usually requires the help of any number of professionals--an attorney or accountant, for example. The success or failure of your business may depend on your initial planning, but how do you plan and what do you plan for?

Factors to consider when starting your own business

Legal structure

You will have to decide upon the legal structure of your business. For example, will you conduct business as a sole proprietor, or will you instead create a separate entity separate like a corporation, partnership, or limited liability company? Each type of entity has its own characteristics, and the structure you choose will depend on which ones you need and want. A separate entity can offer limited liability protection, allowing you to protect your personal assets from lawsuits involving the business.

Taxes(Tax Planning Never Stops)

Tax authorities take special interest in your business! How you and your business will be taxed is an especially important factor to consider. For example, if you choose a C corporation as your legal structure, you may be subject to a double tax--one tax when the corporation makes a profit and another when those profits are distributed to the owners (shareholders). Alternatively, in a partnership, only the partners are taxed. Sole proprietors have to be aware of the self employment tax. For these and many other reasons, taxes play a major role in running a business.

Insurance

You may need different types of insurance depending on the type of business. Your insurance needs may include property and casualty insurance, business overhead insurance, and liability insurance. If you have employees worker's compensation insurance may be an additional requirement.

Staffing

Speaking of employees, who should you hire? What skills must your employees possess? What jobs will they be responsible for? Keep in mind that the more employees you hire, the more your company will be subject to laws at the state and federal level. Some federal laws that address discrimination in the workplace are based on the number of employees in the business. Be sure to screen candidates with a background check so you don't hire problems.

Financing

Insufficient financing is probably the most common obstacle to starting a business. In addition to calculating how much money (capital) you'll need to start and run your business, you have to figure out where to get the funds. Will you use your own money (invest in yourself) borrow from a bank or family member (debt), or take money from investors in exchange for a share in ownership of the business (equity)? If you intend to seek equity financing, you will be subject to securities regulations.

The new year is just a few weeks away. Start planning now to give yourself the best chance at running the business you've always wanted.

To learn more and get started on your business dream, contact us.