Starting a business can be a daunting task. While you may have a great idea that is marketable, the laying of the actual foundation of the business is where many would be entrepreneurs throw up their hands in frustration or completely ignore at their peril. It is important to organize your business at the beginning of your startup to save you and your business from frustration down the road. Here are three things startups must do.
- Get Legal. In order to have a legitimate business, you need to get the right legal framework in place. This is important for a number of reasons. Reason 1: you need to get your business name established so that you don’t have another company take your legal name or your business name does not tread on an existing business. This can be as easy as filing a doing business as with your county or other local agency or establishing a corporation, partnership or LLC. Reason 2: you can protect yourself from the legal liabilities of your business. Setting up a formal business provides a layer of legal protection between you and the business. If something were to happen with your business, you don’t want creditors or other agencies coming after you personally to settle affairs. Reason 3: you can take advantage of tax advantages of setting up a business. Not having a legal structure in place means all of your net income is taxed on your personal tax return both for income tax purposes as well as payroll tax purposes. Using tax advantaged structures, like an S-Corporation, can limit the amount of taxes you pay. Or you can setup a C -Corp and have the business pay the taxes to leave your personal taxes out of the equation.
- Get Accounting. Your business needs to setup an accounting system in order to keep track of how you are spending money, how your cash flows are faring, and how profitable your business is. Too often, startups do not setup their accounting system until it is too late. Also, your business needs to have an accounting system in place, so that your business can accurately file taxes at year end and provide an accounting or financial reports to your investors or other interested parties. There are a number of great accounting systems you can setup, like Xero. You also want to hire an accountant to help you with handling your accounting system. Those involved in startups need to spend their time on building and growing their business. Having an accountant on your team can help handle that aspect of your business.
Get Help. From strategic planning to website building and SEO, your business needs a lot of help getting up and running. Your areas of expertise may not include building websites or understanding proper marketing channels. That is why it is important to bring in outside experts to handle the areas where your expertise is lacking. These folks can help you out in their areas of expertise. While you may want to go it alone and do everything yourself, having a bad website or bad branding may cause your business to fall apart before it even starts up. When I started my CPA firm, I used experts in areas that I had little knowledge on to help me out in starting up. Had I tried to do it alone, I probably could not have gotten my firm off the starting blocks.
These three things startups must do to get their business up and running are critical to the long term success of your business. Failing to do any of these can result in your startup failing before it even starts. Joshua Lance CPA, LLC can help your startup get legal and can help your startup establish an accounting system. Let us know how we can help your business.