Having a realistic business plan is a must to opening a new business. Let’s look at some of the important issues to consider before jumping in the deep end:

– Figure out the money

– Viability

– Market Research

– Sales Approach

– Branding

– Website / App

Figure Out The Money

How much will it cost to open your business? Depending on the business, the cost can range from a few hundred dollars to tens of thousands and more. At minimum there should be legal and accounting fees.

If you are purchasing an existing business, the purchase price and closing costs must be considered. A franchise comes with franchise fees. There is a cost to create the business entity. Operating the business requires inventory, advertising, marketing and banking fees. Rent, utilities and insurance. Employee or contractor fees. Taxes and licensing fees. If you are building or renovating a structure, these costs must be considered.

Before diving in head first, know what it will cost to open the doors. What you think it will cost will probably grow as you get closer to opening day. Build in the need for more money than you estimate. Then know how you will finance and pay to make it to opening day.

This is not all. Once you are open for business, what are your operating costs moving forward? What will it cost to get though the first month, quarter and year? Build in a cushion, because circumstances beyond your control can set you back. Many businesses take as long as 3 years to turn a profit. How will you pay your personal expenses till you can take a salary / draw?

It can feel overwhelming. Being prepared will lead to success and a stress-free experience.

Viability / Market Research
How viable is it that you will succeed once the doors are open? Even if you have the funds to open the business and get by the first few months or year, can it survive? Will it be a success in 2 and 3 and 4 years?

You need to research the need for your service or product in the area you will serve. If a physical location is important, is it easily accessible and visible? Don’t spend money on a location that may not be important to your success. Is there a better location or means to do business? Is your expected profit margin enough to survive and provide you with a good living?

Sales Approach
What is your sales approach? There are as many approaches and hybrid approaches to selling as there are products, services and entrepreneurs. Soft sale, hard sell, consultative, solution, etc. This is a work in progress that needs to be considered and adjusted continuously.

Branding
Make your business a household name. Make sure when someone needs your service or product that you are who they think of first. Logo, business cards, brochures, promotional products…. There are many ways to get your name and image out and keep it fresh and relevant. This is critical. You never know when someone will need or want you, but when they do, you want to be who they think of first.

Website / App
Having a website that is also mobile friendly is essential. Cell phones and computers are the modern-day phone book. Newspapers are barely a few pages. What were advertising mainstays even 10 and 15 years ago won’t get you by today. A strong website and social media presence is essential.

More than 29 years of experience qualify the attorneys at Bellenot & Boufford, LLC to help you get off on the right foot, making sure you have the greatest chance of succeeding in beginning and in growing your business. We make sure you are safe and know how to stay out of trouble. Remember, the cost of doing things correctly is nothing compared to the cost of doing things incorrectly, because you just didn’t know.

When starting a business, determining the business structure is one of the first and most important decisions an entrepreneur will make.

• Sole Proprietorship
• Partnership
• Limited Liability Company (LLC)
• Corporation or S-Corporation

There are a variety of legal, accounting, administrative and personal liability concerns that help determine what is the best structure for each business owner. This article will discuss some of the factors to consider but is by no means exhaustive.

 

1. Sole Proprietor

A sole proprietor is an individual who owns, operates and has complete control over a business. The owner and the business are one in the same. There is no separation between the individual and the business for the debts and obligations of the business. Business income and expenses are reported on schedule C with the owner’s personal Federal 1040 tax return.

Some of the advantages of the sole proprietor business structure is the low cost and ease of creation and reporting. Before the tax law changes taking affect for the 2018 tax year, another advantage was the tax rate for an individual was usually lower than the corporate tax rate.

The biggest downside for a sole proprietor is being personally liability for business obligations. If anyone claims to be harmed in anyway as the result of business operations, the individual sole proprietor will be personally liable if the claimant prevails. The sole proprietor’s home, vehicles, bank accounts and most personal assets will be at risk. A good insurance policy can help protect personal assets, but only to the limit of the policy.

There are other factors and regulations to consider. A consultation with an experienced attorney will assure that your business avoids pitfalls that be difficult, if not impossible, to overcome.

 

2. Partnership

There are generally 3 types of partnerships: General Partnership, Limited Partnership and Limited Liability Partnership.

A limited partnership subjects the general partners to unlimited liability for partnership debts and obligations. The limited partners’ personal assets are generally safe from partnership debts and obligations. Limited partners are only at risk for their investment in the partnership.

Limited liability partnerships can only be created by professional service businesses such as accountants, attorneys, doctors, architects and other fields treated as professionals.

A partnership is a legal business arrangement between 2 or more people to own a business or property and personally share in its profits, losses and risks. Like a sole proprietorship, all partners in a general partnership would be personally liable for all business debts, obligations and claims, putting personal assets at risk.

Creating a general partnership is easier and less costly than creating a corporation or limited liability company. A separate partnership tax return will need to be prepared on Federal Tax Form 1065. The partnership will issue a K-1 form to all partners, reporting each partners’ share of business income and expenses.  The income or loss will pass through to schedule E of the partners’ personal Form 1040.

 

3. Limited Liability Corporation

Limited liability Companies (LLC) are a hybrid of the corporate structure and either the partnership or sole proprietor structure. For most it is the best of all worlds. LLCs provide the owner(s) with the same protection from personal liability for business debts, obligations and claims as a C corporation, with the flexibility to chose how to be taxed. Like a corporation, an LLC is a separate entity from its owner(s). An individual who chooses to create an LLC will be protected from personal liability as if a corporation, while being allowed to report income as a sole proprietor. Partners in a general partnership will also be personally protected while being allowed to be taxed as a partnership.

It is important to follow required legal and accounting practices when creating an LLC. If the owner(s) break the corporate veil (discussed in a different article), a business or judgment creditor may be able to reach the owners’ personal assets.

An LLC is easier to set up than a corporation with the same protection. It is also more flexible to manage once created.

 

4. Corporation / S-Corporation

A corporation is an entity that is separate and distinct from its owners. The owners hold an interest in the business determined by their percentage of shares in the corporation. The owners’ personal assets are protected from claims against the corporation, assuming the owners do not cosign or guarantee corporate debt. The corporation is taxed under a separate tax structure than its owners, unless the owners elect to be treated as a subchapter s corporation.

Since the costs and administration requirements to create and maintain a corporation is significantly greater than the other entities discussed in this article, few small business owners elect this as their entity of choice.

There is much more to know about creating and maintain a business regardless of the structure chosen. More than 29 years of experience qualify the attorneys at Bellenot & Boufford, LLC to help you get off on the right foot, making sure you have the greatest chance of succeeding in beginning and in growing your business. We make sure you are safe and know how to stay out of trouble. Remember, the cost of doing things correctly is nothing compared to the cost of doing things incorrectly, because you just didn’t know.

There is nothing like starting your own business. You are good at what you do, and you are in control. The sky is the limit. The harder you work, the more successful the business will be, right?  Well, maybe. Hard work is necessary to a successful business, but there is so much more that a business needs to survive.

When you don’t know what you don’t know, you can end up in serious trouble. Below are five mistakes that can prove devastating to any business, especially first-time business owners. There are many more mistakes, traps and obstacles that can get in the way of success. Accounting practices are critical. Are you experienced with advertising, marketing, networking and branding your business? Is your business suited for your location? Do you have or know where to find a team of professionals to help support your business, maybe for little or no cost? Have you complied with all governmental regulatory requirements?

The attorneys at Bellenot & Boufford LLC can help you get off on the right foot, making sure you have the greatest chance of succeeding in the beginning and in growing your existing business. We make sure you stay safe and know how to stay out of trouble. The cost of doing things correctly is nothing compared to the cost of stumbling because you just didn’t know.

1. DON’T FAIL TO INCORPORATE OR ESTABLISH AN LLC

Incorporating or establishing a Limited Liability Company (LLC) is an important consideration for anyone starting a new business. It is equally important for any small business owner operating as a sole proprietor to consider. Establishing a corporation or LLC creates an entity separate from the business owner. This will protect the business owner’s personal property:

• Home
• Bank and other financial accounts
• Automobiles
• Income from other jobs or businesses
• Collectibles and hobby equipment
• The business owner’s personal credit profile
• And most other personal assets.

If not incorporated or an LLC, and anyone decides to make a claim or sue a business for any reason, the claim would be made against the individual sole proprietor, subjecting the owner’s personal property and credit profile to be at risk.

If the business is a corporation or an LLC, the claim would be made against the business entity, putting only the business’ assets at risk. The separate entity acts as a “Corporate Veil” shielding the owner’s personal assets from attack. Bellenot & Boufford LLC can help small business owners not only protect their personal assets but learn how to limit the risk of losing business assets. Incorporating or establishing an LLC is the best insurance to protect your personal assets, but you must maintain traditional insurance as well.

2. DON’T BREAK THE CORPORATE VEIL

Now that you have established the “Corporate Veil” it is important to protect and not break the veil. It is critical that the separation between the business owner and the corporation or LLC be complete and uninterrupted.

• Never pay business debts or expenses with personal funds.
• Never pay personal debts with business funds.
• Never commingle business and personal assets.

If a business owner breaks the corporate veil, the owner’s personal assets can be reached to satisfy any judgment that may be held against the business. It will also severely damage the owner’s credit. Bellenot & Boufford LLC can help educate business owners to avoid this disastrous outcome.

3. DON’T GET BY WITHOUT WORKERS COMPENSATION INSURANCE

This can be one of the most devastating mistakes a business owner can make. Every employer is required to maintain workers’ compensation insurance. If an employee is injured while in the course of his/her employment, the workers’ compensation insurance will pay for the employee’s medical expenses, out of work pay and much more. If the employer has such insurance, it cannot be sued even if it was negligent in causing the injury.

If the employer does not have insurance, the State of Connecticut’s Second Injury Fund will act as Workers’ Compensation Insurance. It will pay all the employee’s medical expenses, out of work pay and other expenses. There will be a lien on the business owner and all his/her property for everything the State pays, even if the business is incorporated. Sanctions and penalties will be assessed against the Owner. None of these expenses, fines and liability to reimburse the State are dischargeable in bankruptcy. There are cases where a small business owner is liable for more than $1,000,000. Even in cases with minor injuries the sanctions, penalties and legal fees will cost many thousands of dollars.

4. DON’T SKIP PAYROLL AND STATE SALES TAX PAYMENTS

It is a crime to not pay over sales tax and employee withholding tax when due. A business owner who doesn’t pay these taxes is subject to arrest, conviction, jail and a criminal record. The owner will still be liable for the tax in addition to fines, penalties and interest.

5. MIS-IDENTIFYING AN EMPLOYEE AS A 1099 INDEPENDENT CONTRACTOR

Small business owners must be careful to not mistake an employee as an independent contractor. The owner and contractor do not determine this relationship, the IRS does.  Not only will the owner be exposed to the workers’ compensation violations listed above but will also be liable for all withholding taxes for as long as the working relationship existed, plus fines, penalties and interest.

More than 28 years of experience qualify the attorneys at Bellenot & Boufford, LLC to help you get off on the right foot, making sure you have the greatest chance of succeeding in beginning and in growing your business. We make sure you stay safe and know how to stay out of trouble. Remember, the cost of doing things correctly is nothing compared to the cost of doing things incorrectly, because you just didn’t know.