BUSINESS STARTUPS - A CAUTIONARY TALE
Tripping Over Critical Issues When Starting Your Business
Written by Steven Miller, CPA January 30, 2018
Unless you are a serial entrepreneur, starting your own new business on your own is like walking through new unexplored territory. Think Lewis & Clark. It is sure to be an experience that can be exhilarating and terrifying all at the same time.
It doesn't have to be that way. Think Lewis & Clark with GPS, maps and a helpful, friendly guide.
After all, starting a new business happens thousands of times every day. America offers the economic freedom to pursue your dreams. If you think you can do it all on your own, then we wish you the best of luck and are here to support you.
As an accounting firm with decades of experience, let me tell you some of what we see every day from new businesses owners.
ENTITY SELECTION also is known as BUSINESS STRUCTURE
Don't choose to be an LLC, S-Corporation or C-Corporation at the recommendation of friends or acquaintances.
Some owners choose based on what others in the same franchise have done. Don't think fast and cheap. Every client and business has different needs. One size does not fit all.
CREATING YOUR ENTITY SELECTION ONLINE
Creating a legal entity online without the necessary legal docs or "cookie cutter" paperwork where you answer questions that you don't know the consequences of your answers.
LLC's have many layers and elections, and most individuals do not know what they are.
It is typically three times more expensive to fix a mistake than the cost of doing it correctly in the first place. Not choosing the correct accounting system or selecting the wrong accounting software can be an expensive problem to fix.
Opening a bank account where you currently bank without thought to the many aspects you will need to start up and down the line. Discounting the banking relationship is a common mistake and limits your capabilities now and down the road.
Signing leases on your own. Your hunt for space can be costly without some basic rules to follow and guidance. Did you negotiate? How many hours are you willing or have already wasted?
Who needs insurance? Have you thought or heard, it's all about not spending money when it comes to protection? Notice there is a difference between "saving money" and "not spending money." Not having the necessary insurance coverage can be catastrophic and expensive.
No business plan. I don't need a business plan. I know or can figure out everything on my own.
Run payroll yourself? Just log in, punch in a few numbers, and now you're done. Lots of companies tell you to do it on your own but why would you want to?
Can you afford the time not to mention the risk? Do you know anything about payroll filings? The IRS penalties for payroll errors are some of the most punitive in the Internal Revenue Code.
I don't have time to think about income taxes, estimated tax payments or anything to do with that stuff. I just need to focus on building my business.
Besides, it hurts to think about taxes, and I don't understand them. Do not put this off because it will only make things worse.
Those that fail to plan before they begin their entrepreneurial journey are similar to those that start a trip from Dallas to New York by driving west on Interstate 30.
They start out in the wrong directions wasting time, energy and money while convinced they are on the right path. And if they are a guy, they can't ask for directions.
Smart people learn from their mistakes.
Those who don't learn from their mistakes are not business owners for long.
Wisdom Is In Part Learning From Other People's Mistakes
The value of an experienced CPA in providing you with the advice gained from the experiences of many others who have both succeeded and failed. Your advisor provides you with the necessary information, so you make wise decisions.
The firm of Steven E Miller CPA PC offers an advisory package for those looking to start a new business or those who are in the process of starting a new business.
We provide guidance from the pre-startup phase through entity selection and the fundamental steps needed to open your business.
Not only do we guide you through the process with our recommendations, but we also provide an extensive network of trusted professionals in law, insurance, banking and other services.
Here's a quick checklist to use to see if you've covered all of these topics.