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Want to Start a Business? Where Do You Start?
Starting a business can be a monumental undertaking. And yet, it’s part of the American dream—one of those perilous but rewarding endeavors that’s ingrained into our cultural DNA. According to Bloomberg Business, 8 out of 10 businesses fail within the first two years.
That means, starting your business on the right foot and in the right way is crucial to your success and to protecting yourself should things take a turn for the worse.
There are plenty of options. The best option for you will likely depend on the type of business you see yourself starting: the number of employees, the projected growth, the amount of risk you feel comfortable taking on, and many other specifics.
Start With Some Basic Research
Because the future is difficult to predict, it might be difficult to get a good look at the specifics of your business. How can you know how many employees you might have if you haven’t actually opened your doors yet? The answer is that you need to conduct some basic research.
Often, this research is conducted as part of a business plan. It’s important not to skip this step, no matter how enthusiastic you may be. Developing a business plan can help you determine exactly how to structure your new enterprise. Some aspects of your business you’ll want to research include:
- Location: Some businesses can be run from inside your home. But others will need a publicly accessible location. For some businesses, that location can mean success or failure.
- Risk: Some business ventures tend to be riskier than others. Taking some time to research and assess that basic amount of risk can help you determine how to structure your venture.
- Capital: Whether the funding is coming from you or from investors, it’s helpful to know how much initial capital you can expect to be injected into your new startup. In fact, it’s a good idea to have a very strong handle on the finances of any new business you want to start.
The more detailed and thorough your research, the more likely it will be that you’re making sound decisions. And the more sound decisions you make, the more likely you are to protect yourself from losses.
Types of Businesses
There are several different ways to structure your business. Most small business owners will choose between two common structures: a sole proprietorship or a Limited Liability Company (or LLC). Which one is right for your business will depend on a variety of factors, but the most prominent of those is risk.
Here’s how they basically break down:
- Sole Proprietorship: This is, perhaps, the most common form of business setup. But not because it’s necessarily the best for your business. Rather, sole proprietorships tend to be easy to establish. When it comes to tax season, you would report any profits or losses as part of your own income. For businesses with no other employees, this might be a viable structure. But it does introduce some risks. The owner of a sole proprietorship is also responsible for any debts that this business might incur. This means that should your business fail to make payments on debts, your own personal assets might be used to offset whatever is owed.
- Limited Liability Company: One of the reasons that LLCs are popular is because they help to limit that liability (it’s right in the name). When your business is defined as an LLC, it’s separated from you and your personal assets. Even if you work out of your home, it will be protected should you need to pay off debts. In part because of this reason, LLCs are a little more complicated to get off the ground. The paperwork can be quite technical and even confusing. But the long term protection it offers (not to mention peace of mind) is worth it for many entrepreneurs. Additionally, LLCs are easier to expand as your business grows.
There are certainly advantages and drawbacks to both sole proprietorships and Limited Liability Companies. Finding out which one is better for your long term goals is definitely worth taking some time, doing some research, and even consulting with experts.
The Value of a Business Attorney
Setting up any kind of business—whether it’s a sole proprietorship, and LLC, or a myriad of other options—is a complicated task. That’s why it can be useful to call on the services of a business attorney. After all, you should be focused on running your business!
A business attorney is able to specialize in the often-byzantine laws and regulations surrounding the establishment of a new business. Filling out all that paperwork is complex. And that’s especially true if you’re looking to protect yourself by establishing an LLC.
Additionally, the larger your business is, the more you might need to juggle legally. A business attorney can help you navigate this area and let you focus on keeping your business running smoothly!
To find out what the attorneys at Mallie Law Office can do for you, contact us to schedule a consultation. We can discuss your business, the best way to structure that business, and the kinds of legal expertise you might need in the future.