What you should know before opening a business
Opening a business can seem so easy. You simply get a product or service that everyone wants to have, find a place to sell it, and the money starts to roll in. However, the reality of setting up a new business is vastly different. The harsh truth begins with the fact that a majority of new businesses fail every year. The good news is that by careful planning and preparation, you can increase the odds that your business will not only survive the first few years, but thrive as well. While it can seem intimidating and overwhelming there are guidelines that can help you to reduce the risk, of opening your new business. Here is what you should know before opening a business-
- Decide on a legal structure-Most often when someone is opening a business, they choose to structure it as a sole proprietorship. However, it is crucial to understand that this sets up almost no boundaries between the personal assets of the business owner and the business, itself. While the risk can be minimal in the beginning, as your business grows you need to legal risk, will also grow. You should consult with your tax professional or financial advisor, about the other business structures that are an option for you. This can provide your business, with more extensive legal protection, as it grows and expands.
- Understand what your tax liability will be-Once you open your business, it is important to understand that paying taxes becomes a factor. You should keep in mind that the amount of taxes that you pay will have a lot to do with what business structure that you use. You should consult with an experienced tax professional to clearly determine exactly what you tax liability will be. You should not only be aware of what your tax liability will be, but also what the associated fines and penalties are, for non payment. IN addition, you should keep in mind that you will be held in strict accordance, with the law, to withhold the right amount of payroll taxes. Having a clear understanding of your tax responsibilities will increase the chances of your business being successful.
- Protect yourself with the right insurance-You also need to be aware of exactly what type of insurance you need, for your business. You will most likely need several types of business insurance, even for the simplest business. Do not make the mistake of trying to get away without insurance. This can be disastrous for yourself and your business. You need to have a clear understanding of what your risk, is as far as getting sued, and if your business could survive it. The amount of risk varies widely, but keep in mind that if you have any assets, you could lose them if you face legal action. Those businesses that will be producing a product (manufacturers) will face additional liability since they make their own product. The bottom line is that all business experts recommend getting the right kind of insurance protection, in order to protect yourself and your business.
- Set up a payment plan-One of the biggest problems that new businesses face is having a cash flow shortage. You must have a clear understanding of what your cash flow is and how to keep it healthy. The bottom line is that it won't really matter how much you sell, if you aren't getting paid, for what you are doing. In addition, you will have to be extremely careful about the amount of credit that you extend to your customers. Not getting paid is one of the fastest ways to put yourself out of business. Have an established payment policy and make sure that you stick to it.