Starting a Business – Part 3 – Experts you need to be ABLE to start a business

Send in the nerds! I mean experts.

Opening a business is fun and takes guts. You gotta work long hours (usually) and take some chances. You will need to give more effort than you thought. Trust me, I’ve been there. But you also need some help. There are several experts you might want to consult before and during the start of a business. Here are just a few of them:

Accountant

Your own personal taxes can be difficult to navigate, and adding your business taxes on top of it can be an undue burden, especially when you’re just trying to get a business off the ground. Businesses in heavily regulated industries, like alcohol and tobacco, will also have a number of excise taxes to consider. While there are many accounting apps these days that might help streamline the process, you may find it much easier and less stressful in the long run to invest in a living, breathing human that can sit down and explain the numbers to you. Getting an accountant will allow you to take all the time and energy away from stressing about the tax return and pour it into the day-to-day running of your business. Not only can an accountant make sure your tax returns are sent in correctly, but they can look at cash flow, employee compensation, and margins for growth.

Banker

Most small businesses will need a bank loan or a line of credit to get off the ground, as well as a business checking account. It’s best to find a bank and a banker with whom you feel comfortable. Many bankers will have firsthand experience with small businesses, and will likely be able to provide guidance to you as you move forward month by month. A strong, healthy relationship with your bank can only help your business. Be upfront with what you can and can’t do. If business isn’t going well, hiding your financial struggles won’t help to solve them. A good banker will appreciate your honesty,

Lawyer

No list is complete without mentioning how we get paid! There are many reasons you might need a lawyer for your startup. If you’re forming a corporation or an LLC, you might need help with the State paperwork. If you need specialized, carefully-worded contracts, you’ll want someone trained to read, write, and enforce them. If you plan to deal in heavily regulated industries, it’s a good idea to have someone familiar with the laws concerning them. There are also considerations for hiring employees, such as non-compete agreements. There are a number of ways to protect yourself that you might not even consider, but a lawyer versed in small business litigation can often point out red flags. It’s important to deal with a lawyer that you can trust, and one that appreciates that your small business is your livelihood.

Entrepreneurs

We didn’t just add “Entrepreneurs” so we can have a pithy acronym (though, it is pithy, isn’t it?). In the world of social media, it’s never been easier to get firsthand accounts of peoples’ experiences. For whatever business issues you might have, there’s a good chance that there’s already someone who has stood in your shoes. Your local area is most likely going to have a Chamber of Commerce or some other kind of business organization. These are great resources for you to mine.

All of these experts can help provide peace of mind, something that can often be hard to find when setting up a new business. Accountants, Bankers, Lawyers, and other Entrepreneurs are all good experts to have in your corner.

As always, please feel free to contact us for more help in starting your business.

Starting a Business – Part 2 – Picking a Legal Structure for your New Business

You’ve finally built up the resolve to do it; you’re going fulfill your lifelong dream of opening a kitten grooming salon. Or some other brilliant business venture. Let us assume that you’ve already done research on the market and have indeed verified that the kitten grooming industry is booming.  The business plan is drafted. It’s time to decide what the legal structure of your new business will be.

Here we will explore some of the most basic legal structures that a small business can choose from. The most likely for a small business are Sole Proprietorships, General and Limited Partnerships, and LLCs.

Sole Proprietorship

A Sole Proprietorship is the simplest form of business entity, the easiest to form and easiest to dissolve. If you have no employees, it’s as simple as starting to work. Legally, being a Sole Proprietorship means that you and your business are one and the same. Your business is not a distinct entity, rather a part of yourself. All income and losses are filed along with your own personal tax return. Being the only arbiter of your business keeps things streamlined, but the other side is that there is no protection for debilitating losses. If the kitten grooming industry tanks, all losses are your own. In addition, there are no protections from liabilities you may incur (like when you get sued for giving Mr. Muffins a perm).

This kind of structure makes the most sense for businesses with no employees, no physical storefront, and should mostly be considered for industries where specialized regulation or personal liabilities aren’t a major concern. Kitten grooming can most likely swing it as a Sole Proprietorship. Tobacco sales or chainsaw manufacture had best look elsewhere.

General and Limited Partnerships

Partnerships pertain to businesses owned by two or more people. A general partnership has ownership/operations split equally, while a limited partnership states that one person is in control of the day-to-day handling of the business, while another contributes capital or services that warrant a cut of the profits. In a way, Partnerships are as simple as Sole Proprietorships – the business is still not a distinct entity, which means that taxes are filed on each co-owner’s personal income tax returns. But just like Sole Proprietorships, there’s no liability protection. Under a General Partnership, you and Auntie Brenda can open up your kitten grooming salon and divvy up the work and profits relatively easily. But Partnerships can come with interpersonal issues, and while Illinois and the US government might require relatively little paperwork to form a General Partnership, you’re most likely going to want to safeguard your business with clearly defined contracts. A third-party mediator, such as a lawyer, can help draft and enforce these contracts, and they can do it without bringing up whatever Auntie Brenda did at the last family reunion.

Limited Liability Company

Also called an “LLC,” a Limited Liability Company is the easiest business entity to form and operate. Unlike Partnerships and Sole Proprietorships, the LLC is well and truly a separate business, which needs its own bank account and tax returns. Forming an LLC is a bit more complex, but it comes with its benefits. Under an LLC, members are protected from liabilities of the company, so long as the business is operated in a legal, ethical, and responsible manner. If the kitten grooming industry unexpectedly tanks due to a catastrophic shortage of cat combs, you can fold your LLC with less losses than you might have under a Partnership or Sole Proprietorship.

Our legal assistance can help guide new businesses through necessary government registration, forms, and licenses. Generally speaking, the more money and people involved, the more difficult things can get, and the more you’ll want to get concrete details down in writing. When dealing with your own livelihood, it is important to get these details right.

Starting a Business – Part 1

We are a small firm that seeks to help small and medium sized businesses, and we often get clients who are eager but unsure about how to get their startup off the ground. Here we hope to outline a few of the considerations a potential entrepreneur should have before starting a new business.

Let’s start with the very basics.

Is Your Business Idea Feasible?

This business is going to be your livelihood – make sure that your livelihood is something that is tenable and realistic. You need to do research on your startup idea – what good or service will you provide? To whom? Is there any demand for your idea, and is anyone else already supplying it? See what similar businesses are doing, and whether or not they’re successful.

You’ll find an hour of research on the front end of a business might save yourself months or even years of stress on the back end. It also gives you the practical benefit of being able to demonstrate your seriousness to potential investors. You’ll need to acknowledge that even if your startup is in a healthy, well-trodden industry, your margins might be thin.  Ask yourself whether you’re willing to put the time and money in, and also be realistic about what can happen if this business does not work out.

Choose a Business Name

First, make sure the name isn’t taken. A quick Google search can generally verify whether or not your startup name is already in use. Illinois also has a database of business names currently in use, and registering a name requires that it is sufficiently different from anything else currently in the database.

Second, business names, much like human names, can be judged by a simple litmus test – if you were to tell it to a 3rd grader, would they be able to 1) pronounce it and 2) use dispassionate ridicule to twist it into a parody?  Imagine putting this Business Name on a card and handing it out to investors – it does not need to be boring, but boring and utilitarian are often preferable to gimmicky and gaudy. Think about how you cringe whenever you remember the name of your first email address. Try to avoid that feeling when you’re naming your business.

Business Plan or No Business Plan

Do you need a business plan? What even goes into a business plan? Honestly, there are lots of example business plans online so if you’re curious about what goes in one, look there. Generally, a business plan is not necessary, but it’s probably a good idea to do one. The reason is that the process of going through the plan will help solidify your thinking about your future business. You will think through some of the early challenges the business will face, which will make the growing pains easier to deal with. Plus, if you’re looking for investors, you’ll need a plan. People rarely throw their money at someone without a plan (you’re not Elon Musk).

Decide how to Organize your Business

This is the next step, and it determines how you register with Illinois and the Federal Government, or if you need to register at all. A small business is most likely to organize under Sole Proprietorships, Partnerships, or LLCs. We will tackle what each of these mean in another blog.