With proper planning and the consideration of a few key questions, you will be able to address any hurdle with confidence. The following issues are essential considerations for anyone starting a small business.
The legal form of your business has lasting tax and legal implications. Regulatory filings, risk of personal financial loss, and additional fees and expenses are all dependent on your choice of business formation. Choosing the correct entity for your business needs can be the deciding factor for your success.
A simple partnership or sole proprietorship are two of the easiest businesses to form. Sole proprietorships are formed by a single owner, while partnerships are created between two or more co-owners. In some cases, a declaration of business intent is enough to form one of these businesses. These structures have the benefit of avoiding the extra layers of taxation found in other legal entities. However, the simple nature of formation opens the owners up to increased legal risk. This could potentially result in financial loss above and beyond what was put into the company.
By choosing more formal business structures, such as an LLC or Corporation, your personal assets will generally be protected in the case of legal action. To form one of these structures, licensing and legal documents are usually required to be prepared. Sometimes licensing fees must be paid just to operate the business. Additionally, your profits will be subject to double taxation: the company is taxed as profits are made, and owners are taxed on money they take out of the business.
Before starting your small business, it is helpful to know how much funding you will need. There are a lot of hidden costs incurred by starting a new business. The changing nature of business and technology has made it one of the cheapest times to create a business, but proper forecasting is still vital for a company to survive. Advertising, web hosting, and taxes are all examples of often-overlooked expenses that can break a budget.
To determine how much funding will be required to start your business, you should create proforma financial statements with anticipated sales and expenses. Numerous insights can be gained from this exercise, such as your break-even point and how long it will take to become profitable. Your future expectations can differ from actual results in many different ways, so create optimistic and pessimistic versions of these reports. These alternative statements will prepare you for any scenario.
When you start your business, it may just be you working out of your garage. But as the company grows, you may need to hire new employees for various functions. Information technology, inventory management, and accounting are all small tasks that you initially take responsibility for, but will soon be too much to handle. Hiring employees to take charge of certain activities will let you concentrate on the thing you do best: running your business. The extra help comes with additional considerations though. You will be required to make withholdings from your employees’ payroll and remit these to various agencies. To attract the best talent you may have to offer various benefits, which can be costly.
Your business may not be able to handle additional employees quite yet. If you’re not in a position to take on new employees, seeking competent professional service companies can be a less expensive alternative. From law firms to an accounting and bookkeeping service, numerous problems can be solved by seeking professional help.
Starting a business can be a daunting task, but a small amount of effort on the front end can save you from headaches and failure down the road. The team at Complete Tax and Notary Services can help you build your successful business plan. To see what we can do for your small business, send us a message or call us today.