Several clients or potential clients will tell us they want to start a business, but do not know where to begin. Here is a general overview of things you should consider when starting a business.
Forming a Business
At a basic level, a business need not be a corporation or an LLC to exist; there are several types of business entities. A sole proprietorship exists by virtue of a person beginning to engage in business. A partnership is formed automatically by two or more people working together to engage in a business for the purpose of making a profit. As such, by making the decision and taking the steps to start a new business, you have already done just that.
So, an important question becomes, do you want to stay as a partnership or sole proprietorship, or do you want to explore the possibility of operating through a different entity.
LLC’s and corporations are helpful tools because they protect the owners’ personal assets. So, if the business is sued, assuming you keep up with the corporate formalities, you as an owner should not be personally liable. However, creating an entity costs money and requires you maintain them, so the cost benefits might support incorporating quite yet.
As discussed more in the following blog post, it is important to pick your partners wisely. While working with other people can be very beneficial to capitalize on other peoples’ skills and talents, and to balance out the workload, we all know from our time in middle school that group projects can be very challenging. As such, it is important to consider whether you want to “go it alone,” or if you want to recruit others to join your venture. Both offer their benefits and challenges. You can read more about picking your partners here.
Some say money makes the world go around, and starting a business is no exception. There are several ways to raise capital to get a business going – you can loan money to the business yourself; you can sell stock of a corporation or membership interests in an LLC to raise funds; you can have outside investors loan money; you can get a loan from a bank; etc.
In addition to securing the physical money, you need to consider how much money you’ll realistically need. Costs always add up, but the key is to secure enough funds to set yourself up for success, without overdrawing so much that you are unable to pay the funds back.
These are three elements to consider as you get your business venture going. You can always email or call if you have any specific questions about your business.