In the United States alone, the United States Small Business Administration reports that roughly 627,000 businesses are incorporated throughout the country on an annual basis. On the contrary, an estimated 595,000 businesses close each year across the 50 states, the nation’s capital, and the country’s five territories, Guam, American Samoa, the Virgin Islands, the Northern Mariana Islands, and Puerto Rico.
There are dozens, if not hundreds, of things that entrepreneurs could benefit from doing before starting a business. Since listing all of them is both impractical and likely not useful to you, this article will only contain a handful of ways to properly prepare for starting a business.
Incorporate Your Business
Entrepreneurs who do not legally incorporate their businesses before starting them up leave themselves vulnerable to a litany of real-world liabilities that can readily, reliably be shifted onto the businesses themselves by simply filing a few documents for a relatively low fee – in terms of how much such liabilities could end up costing, that is.
Many small business owners incorporate their entities as LLCs, short for limited liability corporations. Rather than getting nailed with liabilities on a personal level if something were to go wrong in your business operations, your business would likely get pinned with such liabilities and the subsequent costs of paying for such liabilities. Recent market research shows that, on average, the typical state’s government-manded LLC incorporation fees cost $127.
Don’t Skimp On Commercial Insurance
Recent data from an insurance market research firm shows that just over half of all American small business owners forked over somewhere between $400 and $600 in terms of the annual total cost of general liability insurance. About one-fifth of them paid less than $400 in terms of total annual insurance costs for this basic level of coverage.
As a newly founded small business, you won’t need to worry about niche insurance policies. Paying for such policies almost always simply isn’t worth the cost, especially for small businesses that are far from considering themselves as being strapped for cash.
Never Commingle Your Personal Bank Accounts With Business Accounts
The practice of commingling refers to using the same bank account or another way of keeping up with money – in most cases, it’s a bank account – instead of using a personal bank account for your own money and a business account for the business’ current amount of available cash.
Although commingling is one of the most basic things that business owners shouldn’t do, if you keep business and personal funds together, you could find yourself more capable of paying for emergency expenses in the event that they arise.
There is no guarantee there won’t be a poorly timed emergency situation that you won’t be ready for because your funds are tied up in your new business. Even with a personal savings account, sometimes the costs from unexpected emergencies exceed what you have saved. If you do have an unexpected personal or family hardship during this time, online short term loans might be able to help you cover the costs and get back on track. Just remember that these are meant for emergency personal use, not for your business.
Saving Up Money Prior To Starting A Business
When small businesses are just starting out, they don’t earn much – if any – money. This is because they lack established customer bases, they lack reputation in terms of word of mouth and web-based reviews and are unskilled in going about their necessary functions in an optimal, astute manner.
Whether you work a low-wage job right now, are using inheritance to found this business, or not working at all and without family-given money, you should either keep working or get a new job and save up money for a few months, if not longer, to build up an emergency fund capable of paying for between three and six months’ expenses if your business’ operations were to hit the proverbial fan.
Pooling This Advice Together
Don’t just undertake one or two of these tips. Rather, use every single one of them! If you’ve never founded a business before, don’t make the mistake of thinking you know everything when you really don’t.
Good luck in your endeavors – happy entrepreneurship!