Now You're In Business!
Before applying for a business license, it’s necessary to decide the new business’ formal structure—or whether it will be a sole proprietorship, partnership or corporation. At this time, it’s vital to talk with an accountant. “People don’t always understand the tax and liability implications based on their organizational structure,” reports Catha Evans, owner of Mobile, AL-based Evans Financial Services, a full-service accounting and bookkeeping service specializing in small businesses. “So often business owners seek help from an accounting and financial expert after they start to have problems. While I’m happy to work with business owners at any stage of their operations, it’s much better for them if things are set up correctly at the start.”
Figuring Out Your Finances
While writing your business plan, it’s vital to calculate how much money will be necessary to get your new business up and running. You will also need to determine the viability of accessing extra funds during your new business’ infancy. When it comes to financing your dream, the United States Small Business Administration provides excellent resources, including planning strategies and materials, counseling and financial assistance through grant, loan, bond and equity capital partners. In addition, banks and finance companies offer small business loans, and they determine how much you can borrow by considering your credit and other factors.
Also, you will have to decide early on if you will keep working at your current job while ramping up your new business. If you do not plan to keep working, make specific arrangements for how you will survive without a paycheck until the business starts generating revenue.
When Ross works with clients who are thinking about starting a new business, she asks, “Are you going to miss the regularity of a paycheck?” Often, people don’t realize that there’s an emotional component in receiving pay in exchange for work, she explains. As a new business owner, it’s important to keep in mind that you aren’t going to be able to draw a paycheck right away—it takes a while before revenue exceeds expenses. “When in business for oneself, it’s sometimes feast or famine,” she reports. Even if you’ve saved a bit of money, budgeted wisely and planned ahead, you may find that you can’t handle not getting a paycheck.