Small Business Owner Strategies
Financial Planning and Strategies | Small Business Owners
Small Business Owners are the backbone of our country, and we want nothing more than to see those businesses succeed.
No matter if you’re currently a small business owner, or thinking about becoming one, there are important aspects that you should consider.
Choice of Entity
First, consider your choice of business entity – particularly as it relates to income taxes and liability protection.
For income tax purposes, you and your sole proprietorship are treated as one taxpayer, while partnerships and S corporations are pass-through tax entities that pass through items of income and deduction to you. C corporations are separate tax entities on which you pay a double tax – once at the corporate level and again when dividends are distributed.
Different entities provide you with different levels of liability protection. Sole proprietorships and general partner interests provide little protection, while limited partner interests, member interests in a limited liability company, and interests in a corporation may offer much greater protection against liability of the business entity. You may be able to reduce your liability exposure with insurance coverage.
Financing for Your Business
One of the most important elements to having a successful business is adequate financing (capital). The failure to acquire sufficient financing often determines whether a business can get off the ground – not to mention whether it can continue to support itself after it does.
Essentially, there are two ways to capitalize your business: 1) you can borrow money (debt), or 2) you can find investors willing to provide the funds you need in exchange for equity. Deciding which approach (or maybe a combination of the two) is right for your business depends upon how much money you need, your financial situation, what type of business it is or will be, and how much control over the business you are willing to share with others.
Sources of financing your small business might include yourself, family, friends, banks, credit unions, Small Business Administration related programs, angel investors, venture capital, public offerings, or private placements.
Business Record Keeping
Record keeping is ESSENTIAL to having a successful business – whether you keep your own books or hire an accountant to keep them for you. Keeping good business records will not only keep your business running smoothly, it may also help you increase profits. Additionally, it’s always important to have a record to refer to if something goes awry. Your business records let you keep track of where your business has been and where it’s going, as well as point out potential trouble spots and guide you to where you want your business to be.
Business records are not just for your own benefit. If you wish to borrow money; want to encourage new investment in your business; facilitate tax filing and payment; or sell your business, you’ll need accurate records.
Business Succession Planning
If you are a small business owner, there is one question you’ll eventually have to ask yourself: who will take over my business if something should happen to me? It is a difficult question to ask, but definitely one you need to think about. Sooner or later you’re going to need to identify someone to transfer your ownership to – whether it’s a family member, co-owner, employee, or outside party, you’ll be able to relax knowing your business will be passed on to a trustworthy new owner. You can even decide to have your business sold by using a buy-sell agreement or an installment – or perhaps a combination of the two!
We cannot stress enough how imperative it is to have a business succession plan. If you don’t have a succession plan in place, your business may need to be liquidated and all your hard work may be lost.
The information we provide is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.