Some people start a business because they come up with a unique idea or want to monetize their experience working in a particular industry. Others may start professional practices once they finish a graduate degree and secure state licensing.
Whether an entrepreneur intends to start a company offering support services to other businesses or a small accounting practice, they need to be proactive about protecting themselves. What steps should aspiring entrepreneurs complete when they decide to begin new businesses?
1. Developing a business plan
The research stage of any new business concept is incredibly important. The person intending to start a company typically needs to learn about the prospects for the industry in which they hope to operate.
Prospective demand and competitors are among the important matters they need to learn about. They also need to figure out how much it might cost to run the company. From there, they can begin strategizing for financing and make a choice about the type of entity they intend to form.
2. Identifying sources of liability
Any new business comes with liability. Products can fail and damage consumers. Workers can get hurt while performing services for the organization. Professionals can make errors when handling matters on behalf of the company.
Any of those issues could theoretically affect the company’s finances and reputation. New businesses often need a variety of different types of insurance and possibly also licensing. Business owners may also need to structure the company in a certain way to limit their personal liability should something go wrong. They also need contracts that protect them from common risks.
3. Establishing separate finances
If businesses fail, the people who start them may sometimes have a degree of financial liability. Maintaining separate finances for the company is one of the most important steps for limiting an owner’s liability if the company fails or faces lawsuits in the future.
Using a personal bank account for business transactions is a form of commingling that can put personal resources at risk in the future. As soon as entrepreneurs know what type of business they intend to start and have a business name selected, they can begin establishing separate financial accounts for the organization.
Having support throughout the business startup process is important for personal protection. Entrepreneurs who have support are less likely to overlook important considerations or make mistakes that could negatively affect the organization later.
