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5 things every small business owner needs to know to stay in business

accountant37004036.jpgSmall businesses are not a rarity.It seems like just about everyone has tried their hand at being their own boss at one time or another, but very few people actually succeed.More than half of all new businesses fail within the first few years of operation.With odds like that, it can be very intimidating to take the leap and become self-employed.Fortunately, there are some things that you can do to improve your odds of a successful small business owner.

First, the legal structure of your small business can make or break you.All small business owners start out as sole proprietorships.A sole proprietorship basically had no boundaries between what belongs to the business and what belongs to the individual.Initially, any risk associated with your legal structure is minimal.However, as you spread your wings, accumulate assets, and grow as a business, your legal risk grows with you.Setting up your business as a corporation gives you legal protection.As a corporation your business becomes separate from what is yours personally and this includes your credit rating.While having your business structure as a corporation is by no means a requirement for staying in business, it can very easily be what breaks your business if you fall into legal trouble.

The second thing that you need to know to stay in business is how to manage your tax liability.Paying taxes on your earnings can be trickier than you think.How you are required to pay taxes depends on your business structure.Some businesses must pay taxes quarterly while others are require to pay taxes on what they make as they make it.Some sole proprietorships are only required to pay taxes as part of their personal income taxes.Make sure that you know what your tax obligations are or the fines, penalties and taxes themselves could be enough to bring you down financially.Third, if you have employees, you cannot afford to not be setting aside the appropriate amount of Social Security funding because come tax time you are responsible for paying for half of the required amount.If you are your own boss, you do not have the benefit of having half of this withholding paid by your employer, you are responsible for the full amount.

The fourth need-to-know item is in regards to what insurance you choose to have for your business.Insurance is a hard thing because it is not a necessity to running a business.Many companies do not see it as a priority and therefore simply do without it.A simple way of telling whether or not you need to start seriously thinking about getting business insurance is to ask yourself what your risk is of getting sued.Those who work from home in the service industry are far less likely to be sued than someone who operates outside of the home and has a number of valuable assets in their name.If you are manufacturing and selling a product, you can determine your risk or liability by playing out some worst-case scenarios in your head and considering what kind of coverage you may need in the case that one of those worst-case scenarios actually plays out.

The last and possibly most important thing that you need to do as a business owner if you want to stay in business is to make sure that you get paid.You cannot hope to succeed if you are not making money.As the boss of your company, it can be very easy to be lenient when it comes to collecting payment from your clients.But working for free is no way to run a business.When you don't get paid for what you do you waste your time and company resources and hinder your business growth sometimes beyond the point of no return.

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