Wednesday, October 28, 2015

Tips for Starting a Business

CHOOSE A BUSINESS STRUCTURE
· Choice of entity is a key decision.
· Corporations, partnerships, LLCs and sole proprietorships are common options.
· Seek advice from an attorney and CPA before making this critical decision.
DEVELOP A REALISTIC BUSINESS PLAN
· Create a written business plan that outlines financing, marketing, operations and other key elements.
· Develop and follow a cash flow budget.
· Keep a rainy day fund for unforeseen circumstances.
· Consider the need for a business line of credit to mitigate cash flow fluctuations.
· Think big but start conservatively. Consider buying used equipment or running the business from home initially.
· Learn from your mistakes. Errors are inevitable. Learning from mistakes allows you to innovate.
· Learn from others so you may benefit from their experiences.
· Networking with other business owners and professionals can expose you to best practices that have worked for others.
SEPARATE BUSINESS AND PERSONAL FINANCIAL RECORDS
· Use separate bank accounts and checks for personal and business activities.
· Use separate debit or credit cards for personal and business expenditures.
· Software packages like QuickBooks and Sage 50 can be helpful if set up properly.
· Commingling business and personal transactions can become very messy and produce nebulous financial records.
PAY ATTENTION TO TAXES
· A CPA can provide valuable tax guidance in addition to other bookkeeping, accounting and business activities.
· You will likely need an IRS Employer Identification Number (EIN).
· Payroll tax payments and related compliance will be required if you have employees.
· Your business may be required to pay personal property or real estate property taxes.
· Federal, state and possibly local income taxes will be due on any taxable income generated by the business.
· Set aside funds for quarterly estimated tax payments. Penalties will be assessed on late or insufficient payments.
· Be sure to consider all allowable deductions such as the home office deduction or vehicle mileage expense.
· Tax planning is a proactive and critical strategy for minimizing income tax liabilities and preventing surprises.
OTHER CONSIDERATIONS
· Ensure that your business has sufficient liability and property insurance coverage.
· Consider an umbrella liability policy.
· Other types of insurance, such as workers' compensation insurance, may be required.
· Ensure that you have operating and buy-sell agreements, particularly if there are multiple business owners.
· Strongly consider seeking the advice of an attorney regarding formation and operation of the business.