Here are 5 tips for new businesses. Starting a new business can be stressful and scary. You want to make sure you cover all of your bases legally and financially and here are some tips to guide you on your business ventures.
1. Start on a shoestring.
Think small. Don’t rent premises if you can work somewhere else, and don’t hire employees until you can keep them busy. (You can hire independent contractors or temps in the meantime.)
2. Protect your personal assets.
While you can protect yourself against lawsuits by buying business liability insurance, this won’t help you with business debts. If you will be running up big debts, consider forming a corporation or limited liability company (LLC).
3. Make a business plan, no matter how short.
Understanding your profit numbers and creating a break-even analysis is the first step in making a business plan. For most small companies, the key portions of a business plan are the break-even analysis, a profit-and-loss forecast, and a cash flow projection. (Projecting your cash flow is key and will make or break your company: Even if your business is getting plenty of work or selling its products, if you’re not getting paid for 90-180 days, you’re not going to survive unless you’ve planned for it.)
4. Put all agreements in writing.
Even if not legally required, it’s wise to put almost everything in writing, because oral agreements can be difficult or impossible to prove. This includes leases or rental agreements, storage agreements, contracts for services (such as consulting or electrical work), purchase orders or contracts for goods worth more than a couple hundred dollars, offer letters of employment, and employment policies. Get in the habit of getting and giving receipts for all goods, services, and deposits, regardless of how much.
5. Pay your bills early and your taxes on time.
Most importantly, pay your payroll taxes on time, especially the portion that you withhold from your employees’ paychecks. The IRS and state tax authorities can hold you personally liable for these taxes, plus stiff penalties, if they’re not paid. This is true even if you operate your business as a corporation or LLC or if your business goes bankrupt — you will still be personally and legally on the hook to pay back payroll taxes.