Things you should do before opening a business
If you are planning on becoming a business owner then it is important to realize that the management of your business starts long before you open the doors or set up your website. Many people assume that opening a business is easy and only involves finding the right product or service to sell. However, the reality is that setting up a business can be a complex process that requires several steps long before you begin selling anything. The reason that it is so important to take these steps into consideration is that a large number of businesses fail all the time. This make the planning and preparation phase crucial to the long term survival of your business. While it can seem daunting, following these guidelines can help to get your business up and running and thriving for the long term. Here are some things you should do before opening a business-
• Choose a legal framework for your business-Many times when someone is opening a business they simply assume that a sole proprietorship is the right legal structure for them. However, it is crucial to understand that this type of legal framework does not provide any boundaries between the assets of the business owner and the business. This means that while your risk can be small in the beginning as your business grows your legal risk will grow, as well. Before you make a final decision you should consult any financial professional that you are working with for guidance and information about your options.
• Understand business taxes-One of the most common things that new business owners overlook is the fact that they are now dealing with a business tax structure. This makes it critical that you determine what your liability will be in terms of the amount of taxes that you will pay. It is also important to know that the amount of taxes that you pay will be directly influenced by the legal structure that you choose for your business. Before opening your business you should meet with your tax preparer (who is hopefully experienced with business taxes), to determine what your tax liability could be. In addition, you should educate yourself about any potential fines and penalties for non payment. Finally, be aware that as a business owner the IRS offer no leeway for business owners who fail to pay their payroll taxes. Once you have a complete idea of what your tax liability will be then you can move to opening your business.
• Set up account receivables policy-One of the biggest problems that new businesses face is a lack of cash flow. Unfortunately, many new business owners are unsure as to how to collect from people who owe them money. Keep in mind that if you are not getting paid then it really doesn’t matter how much you are selling. As part of your accounts receivable policy you should also have an established policy on who you will extend credit to. Many small business owners feel that they have to give credit to all of their customers or they will go somewhere else. This is not necessarily true. You should take the time to carefully consider and research anyone that you will be extending credit to for the health of your business finances.
• Have the appropriate insurances-The reality of the business world is that there is a lot of liability for business owners. You need to know what type of insurance you need to have for your specific business. Keep in mind that even simple and fairly straightforward businesses may need several different types of insurance. You should not try and “get by” without insurance as this can be disastrous if you are sued.
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