Starting Your New Business: 3 First Steps for SuccessSep 18, 2020
So, you have decided to take a big step toward your goals and want to build a business you can call your own. Whether this has always been your dream or an unexpected lane change due to current circumstances, it is crucial to know where to begin. We live in a country where over 500,000 new businesses are started each month, do not let yourself become one of the 30% who fail within the first two years by considering these simple steps.
1. Choosing the Business Structure that is Right for You.
One of the first decisions you will make about your new business—besides the name—is how it will be structured. Depending on your business goals, you will choose either an informal or formal structure:
Informal: Simple to form, low-risk, allows you to test your idea without investing too much time or capital. Two examples are a sole proprietorship or general partnership (if more than one owner). However, the risk of choosing this route is that there is no legal separation between you and the business. This means, in the event of liability, your assets—personal and business—could be at risk.
Formal: Provides credibility, legal separation from your business, and the opportunity to build business credit. Options for a formal structure are a limited liability company (LLC) or corporation. If opting for a formal structure, it is recommended to start as an LLC. This is because they are easier and cost less to form and have the advantage of avoiding double taxation. Corporations can be more complex as starter businesses, but you can always start as an LLC and choose to transition to a corporation later.
PS: When in doubt, here at The Gallo Group, we are a team of experienced accountants that can help you determine your best option! 😉
2. Knowing What is Required in Your Industry.
With our structure chosen, it’s time to get to the nitty-gritty. Before you can cut the red ribbon and start doing what you love, you need to educate yourself on the requirements of your industry.
Get acquainted with required permits and licenses. All new businesses will require a license. The type and number of licenses needed will depend on where you live and the industry you are in. One great resource for this information is the US Small Business Administration’s website, where you will find directories to various state offices.
Understand the taxes and fees you will be subject to from your operations. Your tax requirements will depend on what state you are located in and your business structure. There are also several different kinds of taxes, like applicable sales tax and employer tax, if you decide to hire employees to help you with your business. Consult with an accountant to be ahead of the game and avoid any complications due to non-compliance.
3. Selecting an Appropriate Accounting System and Learning How to Manage it.
Congrats! Now you are in business. Your customers are happy, and the money is flowing. What’s next? A critical tool to growing your business is an organized accounting system that clearly shows your financial position.
What comes around quicker than the renewal for that free trial you swore you were going to cancel? —Tax season. As an accountant, one thing I always emphasize to my clients is implementing a routinely updated accounting system to simplify their tax preparation. With the system in place, you will be able to generate accurate financial reports to help guide your business decisions throughout the year. You can also use this to optimize your accounts receivable, payable, and payroll processes.
Overwhelmed by all of this information? You are not on this journey alone. Developing a relationship with an accountant who understands your goals will allow you to focus on what matters the most for you—business growth. From choosing the system itself to how it will be maintained, your accountant can help guide you to make the right decisions.
One of the highlights of my profession is knowing there is no “one size fits all” approach, and each client comes with a different set of needs and objectives. The team here at The Gallo Group is ready to help you materialize your business vision and take that next big step!
Worrying about beating the odds when starting a new business can be scary, but rest assured, you are doing something amazing! Empower yourself with this knowledge and be ready to face your business journey with confidence always.