Make sure you get your company started on the right foot!
Everyone knows there’s a certain level of risk when you start a business. No matter how good your ideas might be, or how savvy you are to marketing and entrepreneurial tactics, there is no absolute guarantee that you will succeed. But many people do feel that the benefits of owning your own business far outweigh the risks. It’s all a matter of making sure you set yourself up for success early on, and that means avoiding early-stage entanglements. When you know what issues and situations to prepare for, you’ll be setting yourself— and your business— up for long-term gain.
By Mary Juetten
Risks enter the frame on the first day that you start to seriously operate your business by taking it from an idea that kicks around in your head to one that is spoken out loud and made tangible on physical or digital media. You may not consider it to be a business as such without the associated trappings, like websites or an office or at least a business card. But your business has its origins in those early moments, and you have to start immediately treating it like the nascent venture that it is in order to avoid some of the very early risks that can threaten to derail what you’ve only just created.
That very, very early-stage business might not feel like an entity separate and apart from yourself, but treating it and the money you’re spending for the project as an extension of your own personal finances is a mistake that can lead to messy accounting and unnecessary personal risk for you and your family. Obviously, you’re not going to have financing at that stage beyond what you’re putting into the venture yourself, but not keeping clear records of what you’re spending on your project and what those expenditures are for could lead to a headache come tax time.
To that end, forming a business entity as soon as you start developing your idea is a smart measure that will pay dividends. Having an LLC or other entity allows you to keep your personal and business expenses separate and avoids putting the finances of you and your family at risk. It might feel premature to take such a formal step so early in the process, especially if you’re still operating from a spare desk at your home or a separate folder on your laptop, but if you are serious enough to commit your time and money to make your idea work, you should be responsible enough to formalize it as the professional venture you want it to be. However, you also need to have a business bank account and keep the money separate from your personal accounts.
While you may have disentangled your business from your personal finances, there still exists the risk that your other professional life might quash your entrepreneurial dreams before they even have the chance to begin. While there are plenty of exceptions, anecdotal evidence would suggest that most ventures start as the side projects of those working in jobs that want to strike out on their own. And while trying to juggle a day job and a new venture can be hard enough in and of itself, there are other risks that come along with starting your own business while working for someone else’s.
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