If you've decided that the time has come to take the plunge and to go into business for yourself, you're probably excited and nervous at the same time. Both of these feelings are completely natural for those in your position. However, you can take the edge off the nervousness by taking certain steps to prepare yourself for the unique challenges. Following are three things you should do before opening your business to make sure that you're as prepared as possible for your new life as an entrepreneur.
Take a Business Law Class
Although nothing can take the place of a skilled business law attorney who specializes in legal matters pertaining to small businesses, every small business owner should have a good basic understanding of all state and applicable laws regarding owning and operating a small business. Having the rudimentary concepts of small business law down will help you to avoid uncomfortable situations caused by unintentional violations of the law.
Keep in mind that not only are modern small business owners responsible to adhering to the local laws of the communities in which they are located as well as all state and federal laws, but they must also follow applicable laws in the countries that they plan on doing business in. For instance, import restrictions vary by country, so you need to know where you can and can't legally send your products to customers.
A good working knowledge of business law will provide you with an edge when it comes to understanding and negotiating contracts. You'll also be aware of the meaning of concepts such as intellectual property, which will be beneficial if you're dealing with copyrights and patents. Basic knowledge of product liability is essential if you're selling any type of product instead of providing a service—product liability is the extent that you can be held legally liable if your product causes unintentional harm to another.
Get Your Credit Rating in Great Shape
Even if you've managed to do the nearly impossible for new entrepreneurs and amassed enough operating capital so that you won't be dependent on credit to stay afloat, you should still work on getting your credit rating in the best possible shape. Few small businesses are able to operate on a cash-only basis, and even those who are often prefer the convenience of buying on credit. For instance, if you decide to open a coffee shop or restaurant, you'll be purchasing the same products on a regular basis, and establishing a line of credit with a distributor will ensure an uninterrupted supply in the event that your business experiences a minor cash flow hiccup.
Besides being a matter of convenience, using credit as a business owner may have financial rewards as well. Your business will also receive a business credit rating, and a good business credit rating comes with certain benefits. For instance, you'll be able to receive more favorable terms, such as lower interest rates on small business loans or larger lines of credit. Having a good business credit rating may also qualify your for lower business insurance rates.
Hire an Accountant
Even if your business plan is to operate as a one-person show for the foreseeable future, hiring an independent accountant to manage your finances is a smart move. Outsourcing accounting duties is more cost-effective than bringing on a full time employee to perform this work, and you'll have the peace of mind that comes from knowing that your finances are in capable hands. Keep in mind that even small accounting errors can trigger audits from both the IRS and your individual state taxing agency, and even if you haven't intentionally done anything wrong, an audit can take up an abundant amount of your time and energy.
Share16 January 2018
When I started my first small business, I had no idea how much I really didn’t know. I was fully prepared to deal with customers, sell product and even handle complaints and returns. What I wasn’t aware of was that there is so much more to it. I was lacking the legal expertise to protect the company and myself. I wanted others to benefit from my experience, mistakes and lessons learned, so I started this blog. From employment law to the legal business contracts you’ll have to sign when you form partnerships, business law is complex. I hope that the information here will help you to be better prepared when you start your business so that you’ll know when you need to call an attorney and when you can handle things yourself.
