Starting New Business Considerations
Whether you are a first time entrepreneur, thinking about becoming an entrepreneur or even if you are a seasoned business owner with many successful starts under your belt, there are some things that every new business owner should consider before launching a new business venture.
(1) New Business Owners Should Protect Assets Before Launch
Are you thinking about starting a business? Owning and starting a business mean that you are a risk taker – but you shouldn’t take unnecessary risks with your personal funds. Creditors, disgruntled employees, competitors, government regulators, the tax man and others would like nothing more than for all of your personal assets to be reachable when they have a claim against your business. There are a few simple things you can do to help protect your personal assets before you start a business.
- Don’t co-mingle your personal and business assets – don’t pay for business expenses from your personal checking account and don’t pay for personal expenses from your business account. If you want to keep your personal assets separate you need to take deliberate steps to ensure that the flow of money is also kept separate. This means making sure you work with your accountant to create proper records for money that you deposit into the business for business use and money that you take out of the business for personal use.
- Form a limited liability company or other appropriate business entity to shield liability – operating as a sole proprietor, an individual under a DBA, or even under a general partnership will expose you (and your personal assets) to liability incurred by your company, your employees or your partners. An attorney can help you select the right business entity for you to act as a personal liability shield.
(2) Before your start a business get it in writing
Many business disputes start because of a difference in understanding over some fundamental aspect of the business. Especially when you start a business with co-founders, partners, or investors, the chance of misunderstanding or miscommunication is greatly increased when business plans, objectives and agreements are not made in writing. Sure there are a lot of decisions that can, and should be made quickly without taking the time to write everything down, but for certain items you want a written agreement. Founders agreements that are written on the back of a bar napkin still wet from a night of brainstorming are just not enough. Every new business can benefit from a well-planned Founders Agreement or Partnership Agreement.
Also, Shareholder Agreements, Operating Agreements, Corporate ByLaws, Investment Agreements and other fundamental business documents provide the guidelines and governing rules for your business. Perhaps they seem like overkill, and often they are, however, where there is a dispute about direction of the business these documents, prepared by your business attorney will help you avoid disputes and save a lot of money.
(3) Find professionals you can trust
Seasoned business owners know that the most important thing they can do to ensure their success, increase the value of their company and protect their hard earned efforts is to surround themselves with a good team of professionals. Every business needs an accountant and a business lawyer, at an absolute minimum before they launch. Other key team members should be a tax professional, a seasoned industry veteran mentor. As the saying goes an ounce of protection is worth a pound of cure and by surrounding yourself with professionals you can trust, before you launch your business, you will be taking the right steps to ensure your success.