5 Common Mistakes in Starting a New Business
Starting a business is a bit more than having a great idea for a product or service. There are other important – legal – decisions to be undertaken. The truth is a large percentage of new businesses fail within the first 18-20 months; however, arming yourself with a bit of knowledge can make all the difference.
Here are some things you need to know:
- Always Get Advice from A Professional – Forming your business can be very complicated if not unique. There are those who go forth as a sole proprietor and its fine for them, and there are those who require a level of legal protection not afforded by a sole proprietorship, and that’s smooth sailing too. Still, there are those who look at an LLC filing as adding real status or credibility to a business – and in truth it is very easy to obtain an LLC even online – however, not understanding what your business entity is, will cost you more in the long run, especially since there are tax requirements and compliance fees to be aware of, and very few states will permit a company to change business structures once that structure is decided upon, so it’s important upfront to choose your entity wisely. Consulting a professional such as Dunham Tax Professionals is so important moving forward.
- Knowing What You Don’t Know – Even if you ensure liability protection, it doesn’t extend that protection to criminal acts, fraudulent practices or using the corporation to further your own personal interests, such as raiding corporate coffers for personal expenses.
- Getting the Proper Local Business Licenses – Too often, owners discover they are not in compliance with local business ordinances – even if they are properly incorporated – and end up paying thousands in fines or back taxes, or worse, a combination of both with loads of additional penalties.
- Get Compliant and Stay Compliant – Once you do create a business entity – either an LLC or corporation – there are several responsibilities you have to maintain legal compliance, e.g., fees, licensing renewals; reporting timely and accurate changes in ownership or agents; tax liabilities. Failure to file current paperwork or taxes can result in both late fees and other fines and penalties for you and your business.
- Having Sufficient Capital – This may not seem necessary to point out, but it takes money to start a business: owners need to be mindful that there will always be liabilities to cover. And if you don’t have enough revenues, assets, capital or insurance to cover your liabilities, you’re going to be subject to some potentially aggressive penalties.
The advice of an accountant or financial professional is crucial to determine what you need to start your business in the right way in your state or municipality. Dunham Tax Professionals are always available to assist you. Schedule an appointment today.