Hmmm, have you ever wondered what it would be like to start your own company? Taking that idea you have had in the back of your mind for some time now and making it a reality. Never having to work for someone else and actually get paid what your worth for your knowledge and experience and time you spent in educating yourself. To wake up each morning energized for the first time to go to work because you’re doing something you absolutely love, and it’s all yours.
Maybe your dream is to write a book, provide a service, create a home based business or turn your week-end hobby into a 5 day work week, whatever it is in life we all have to take a shot in favor of ourselves. For me, I did not want to reach 80, look back at my life and at all the things I wanted to do and didn’t, and have regrets. So what if I failed, would it have killed me? I could have succeeded, and now I’ll never know because I was too scared to take a chance on me. Who better than us knows what will make us happy, content and productive members of society.
If you truly have a burning desire eating away at you to open your own business then I say do it. Initially you may decide to do it on a part-time basis, fine, DON’T procrastinate!!!! I know that it can be quite overwhelming, there is a lot that you do not know or understand but I can tell you from experience that the risks are worth it. It’s a feeling of total liberation, joy, and expectation. Yes, there is that little thing called money, and you do lose a certain amount of security until the business is up and running and you will always have friends, family members and even current co-workers who will try to discourage you. Just remember one thing. You are the one that is living this life. No one else and you only get one shot.
That’s where I come in. I would like to help you get started. I want to see you realize your dream and to see your business succeed from the beginning with all the correct information. I would like to share that information with you through the following articles.
That is the first article in the series “BANKING ON MYSELF”, a guide for the entrepreneur in you.
So you finally made a decision as to the kind of business you would like to have. The next step is making sure that you create a separate identity for this business. By that I am referring to setting up a Corporation or an LLC. You may be saying to yourself why do I need to do that?
When you run your business as a sole proprietor you and your business are considered to be one and the same. There is no definite separation between the two. So if someone sues your company who are they suing? The answer is you! All of your personal assets are at risk. You could lose your home, your cars, your bank accounts, your investments and any other assets you personally own. Now turning that around if you are personally sued, you could lose not only your personal assets but you could lose your entire business and all of its assets that have taken years to acquire. If you are like the rest of us we all work too hard to get what we have and it would be devastating to lose it because someone see’s dollar signs when they look at your business or personal assets. So before you open your doors it is crucial that you form your Corporation or LLC first.
Your probably asking yourself what is the best entity for me to choose. Well, that all depends on what type of business you are going to have. For instance will you be issuing stock to raise capital? Will you have earnings in access of 250,000.00? Are health benefit deductions important to you? Will you have several employees? Do you want to file a separate tax return for your business? Although there are other considerations involved in your correct entity choice, if you answered yes to any of the above chances are a C-Corporation may be the best one for you.
Another example, if you are planning on purchasing real estate for investment purposes, fixing it up and selling it your entity choice should be a LLC. If you intend on having partners in real estate investing a LLC would also be appropriate.
If you are going to have a other type of business for instance a consulting business, or a business via the internet, and this is your only job and income, and you want to receive a salary from this business, then you may choose a S-corporation. When choosing this type of entity, there are other things to consider as well. For example there cannot be any foreign owners for S-Corporations and no more than 100 members. We will go into further detail in the second article.
Now that you have set up your Corporation or LLC you need to protect it and yourself. The whole reason to set-up an entity separate from yourself is to protect the share holders or the director from the debts or liabilities of the corporation.
You may have heard the term protecting your “Corporate Veil”. What does that mean exactly? Well there are certain things you need to comply with in order to run your business as its own separate entity and decrease the likelihood of anyone being able to pierce your “Corporate Veil” to obtain your personal assets or to take over controlling interest in your company. In order to do this you need to keep very accurate records. For instance, when the share holders, partners, or directors get together for scheduled meetings to decide on budget matters for the company, leasing agreements, personnel changes and other important day to day functions you need to keep very accurate (minutes) of these meetings, the meeting themselves and the resolutions agreed upon. A C-Corporation has to be very accurate and precise. It never use to be that important for LLC’s because they were less stringent in this category but for your own protection and that of all members you should do it as well.
Also, you need to be very careful about co-mingling your funds. In other words do not mix your business funds with your personal funds. Example, do not pay personal bills with corporate funds from your corporate checking account. That is strictly taboo.
Third, make sure that your business is properly capitalized. In other words you have enough money for expenses, payroll, inventory, liability insurance, and such before you open your doors.
For manufacturing there is a standard. If you have any questions regarding the capitalization for the type of business you have call your secretary of state and request information.
Lastly and also very important, make sure that you purchase enough liability insurance as well as Errors and Omissions insurance. Most people are familiar with liability, hardly anyone knows about Errors and Omissions. It is important protection in case you mess up on a job or do not have it ready on time as promised in a contract. Should one of your employees make a mistake or anyone else that represents your company, you will be protected. Also, please know that having a separate entity for your business does not omit the need to carry insurance. You need both!
I hope that this article has been helpful to all you aspiring entrepreneurs.