7 Things Nobody Tells You About Starting Your Own Business
Thinking about starting your own business? Launching your own company can be a rewarding experience and a great way to make money and build a dream. But before you launch your startup, you need to be aware of a number of things that are critical to reach your business goal. Creating a business is not a simple task — it includes important details that you have to put in place. The more you know going in the more control you have to become a successful entrepreneur. To jumpstart your journey, here are seven things you should know about before starting your own business:
1 – Write a business plan.
A business plan is an essential tool to outline a roadmap for your company. It is a written guide that helps you project the future of your business and gives you a clear direction of what to plan and expect. A business plan should be professional and should set out to grow your company. This vital document should include your company profile, vision, mission, business goals, company description, market analysis, business structure, strategies, product line, financial predictions and funding request.
2 – Determine your business structure.
Examine and research all the different business structures that exist and decide the best option for your business: sole proprietorship, partnership, corporation, S corporation, Limited Liability Company (LLC) or non-profit. Your business structure will affect your business growth and taxation. Not all new businesses qualify to start as a Limited Liability Company or a sole proprietorship. Get more in-depth information before you determine a legal structure by talking to an accountant or to a lawyer.
3 – Register your business with the State.
You need to register your business with your state government. Obtain an Employer Identification Number from the IRS and with your state revenue agency. In many states, businesses established as sole proprietors don’t need to register with the state unless they operate under their own name. The legal name you use to register your business will be used to legally operate and obtain financial help if needed.
4 – Find out your tax requirements.
You need to know your business tax requirements. Your business structure determines the type of tax return you have to file with the IRS. At the federal level, business taxes include the income tax, the self-employment tax, taxes for employers and the excise tax. At the state level, business taxes or corporate taxes requirements depends on the legal structure of your company. The more organized you are with your taxes, the less fees and penalties you will pay.
5 – Separate your business and personal finances.
It is important to separate your business from your personal life to avoid money issues and financial consequences. You need to open a separate business bank account. With this account, keep track of the money received from your business and you can establish a good financial history for future funding requests.
6 – Seek legal advice.
All entrepreneurs should seek legal advice before starting a new business. Most business owners think of legal counsel only when they run into a problem, but legal consultation is the best way to prevent trouble and set the company on the right path. Keeping your business out of trouble or preventing business issues with the help of an attorney is the best proactive preparation. A legal problem can critically impact the operation of a company.
7 – Build a business emergency fund.
An emergency fund can cover your expenses in a time of a business “drought” and help you avoid financial disaster. It can also help cover your tax requirements. Move money every month into an emergency fund to build your savings and be prepared for any financial situation so you can focus on developing and growing your business.
Make sure you cover all bases before starting your business and remember to stay organized, prepared and ahead of the game. Planning is a vital part of a successful business.
For more information on the tax implications of starting your own business, read the post “Life Change Checklist: Starting a Business“.
Learn more about self-employed tax filing with advice from the tax experts at H&R Block.
How does self-employment affect your tax rate? Learn how to file taxes for self-employment and get tax answers from H&R Block.
The startup tax or new business tax is a topic many new business owners shy away from. Don't get caught off-guard. Review these tips provided by our tax pros.
Learn more about claiming expenses when self-employed with advice from the tax experts at H&R Block.