Up and Running

Starting a business has never been easier.  The traditional launch used to be that you have to hire a good attorney, accountant, and create a business plan.  It was said that a plan on paper was essential in getting a good start.  It would accomplish thinking the entire business through and identifying the challenges that lay ahead as well as the operational expenses.  That may be so… however, it requires a lot of time and nothing always go as planned.

After waking up from “The American Dream,” many people get excited.  Yes, I said waking up.  Why?  Because, you have to be asleep to be dreaming!  To get started, people tend turn to the old way of starting a new business.  They contact a professional to start the formation process.  A corporation or LLC is their entity selection because everyone wants to be a Chief Executive Officer and believes protection is priority.  This is damaging for inexperienced entrepreneurs who have limited start-up capital.

Before you begin, let’s take look at some options you may have.  Let’s assume that capital for this new venture is limited and the business plan hasn’t been fully thought out yet.  This is common so don’t feel uncomfortable.

The first step is to determine what type of business you’re going into.  You should already know the answer from your dream you excitedly woke up from.  The next step is entity choice.  Are you going to become a sole-proprietor, partnership, corporation or limited liability company?  To get a better understanding, I recommend reading Garrett Sutton’s Own Your Own Corporation.  The entity you select will determine the company’s asset and liability protection and how you are taxed.

In my opinion, if you’re in the start-up stage and plan to operate out of your home office, you should first consider a sole-proprietorship.  It’s very cost effective and requires minimal paper work.  Don’t be too overly concerned about asset protection and job title.  In the start-up stage, chances are you won’t be making serious money; therefore, there is really nothing to protect.  This step will get you up and running the quickest.  You can always later convert to a LLC or corporation.

Time will give you a better understanding of your business and you’ll soon develop a strategy of how to accomplish your goals.  Your history will indicate which direction you should head.  After the start-up stage, it’s crucial to get the advice of qualified professionals.  There is much more at stake.  Protection, operations, and your tax status will become a top priority.

Technology has made the challenges of owning a business more reasonable.  There are many companies that assist individuals in getting started and for a fraction of what traditional formation attorneys charge.  If everyone can own a business, I suspect the statistics that 9 out 10 businesses fail in their first 5 years will be reduced to 3 years.