Many businesses fail every year. Mainly because people are unfamiliar with the basics of running a business. All businesses involve risks.
Consult certified accountant.
And lawyer prior to investing in a venture. The very first thing you ought to think about. When starting a business is the legal entity you will be operating as.
Each type has its own advantages and disadvantages. There are essentially four types. Sole proprietorship, partnership, limited partnership, and corporation.
One of the major reasons for a business to fail. Is because the founder wastes startup capital. On frills like expensive office and furnishings.
If you want your business to be successful.
You must have a tight rein on your expenses. Anything that does not safeguard your investment or make money for you. Should not be purchased at this time.
Naturally, this applies to the expenses of setting up your business. Unless you have a partnership and start your company as such. The only genuine benefit of forming a corporation.
Would be to protect the property you personally own. Yet, if you are found guilty of misusing corporate funds. Your creditors can come after your possessions.
But if you invest everything you have in your business.
You do not actually need a corporation since you have nothing to protect. Basically, your personal asset is already protected. By the homestead provision of the Federal Bankruptcy Act.
And cannot be taken away from you. As a sole proprietor or a business partner. You will be paying taxes on your overall earnings.
As if you were holding down a salaried job. Whether you draw out money as salary or not. Will have no impact on your business earnings and tax return.
The advantage of incorporating.
Is that you can control your salary to minimize on tax. When your company is successful and starts to make a lot of money. You should look into incorporating.
There are also disadvantages of incorporating. Corporation pays higher taxes, reports more detailed accounts, has stricter business laws. Hence, your accounting and legal fees are higher as a corporation.
Than as a sole proprietor or a partnership. As a sole proprietor or partnership, there will be many areas that will require your registered business name. Such as opening a business bank account.
Choosing a business name is very important.
Especially relative to marketing. Your business name should describe the service or product you offer. Should you purchase, lease, or rent a space for your business?
Be prudent before you make any decision. As businesses tend to either grow quickly or they never get off the ground. Purchasing a property gives you the ownership of the property.
Regardless of what happens to your business. Leasing a property over any length of time will tie you down to paying for that space. Regardless of what happens to your business.
For starting out.
It is good idea to rent with a choice to lease in future. Next, you must open a business bank account. Different banks specialize in different types of businesses.
Choose one that is convenient to your business location. You will want to set up the handling of major credit cards with your bank. Having the ability to accept credit card transactions will greatly increase your sales volume.
For corporations, you will require a corporate resolution. Authorizing of the opening of your business account. Every state’s regulations on sales tax permits and licenses vary widely.
Many suppliers will not sell.
To you at wholesale prices until you can show them your sales tax permit. If your business sells in other states, you are not required to collect taxes. Other than in those where you have stores or offices.