Legal Magazine

Top 5 Questions Asked When Starting A Business

Posted on the 12 April 2015 by Jslubinski @jslubinski

Starting a business is not easy. Most business owners would tell you that. In addition, most business owners would tell you that owning your own business is very rewarding. It is of course, if it's a success. Before taking the leap, do yourself a favor and research everything - all aspects of a successful business.

Below are some common questions most people ask when thinking of starting a business, whether it's on-line or bricks and mortar.

The answers to all the questions are complicated. There is a lot involved. There are many rules and regulations governing certain professions. There is no one answer that fits all. What I've attempted to do here is give you some general information. Your best course of action is to consult an attorney or tax accountant. I am neither, and I cannot guarantee that my answers are the right ones for your situation.

1. Do I Need A License? Many people ask this question and the answer is yes and no. Some businesses need licenses. Others do not. Some states require certain licenses, some do not. The federal government sometimes requires licenses, but it depends on the business.

Think of realtors. Most everyone knows realtors need a license to sell real estate. Think of bankers. Again, bankers need a license, as most people are aware.

If you think about certain professions, you'll start to understand this reasoning. Most license programs are instituted because the government needs (or thinks they need) to regulate the business in some way. So, thinking about it in these terms, you can probably get an idea as to the requirements of the business you're thinking of starting.

However, there are exceptions to ALL these statements. The only way to know for sure is to consult an attorney or your state. Do your research. You'll find out a lot.

2. Which Entity Should I Choose? This question is not as simple as it may sound. Entities, such as sole proprietorships, partnerships, S Corporations, C Corporations, LLC's, and more each have their own advantages and disadvantages, from a tax standpoint and well as bookkeeping and more.

Sole proprietorships are definitely the easiest to set up and run. They also have the least restrictions. However, they may not be your best choice for tax or other reasons.

Corporations are a good choice if you want to limit your liability. As most people are aware, when a corporation is sued, usually the personal assets of the owners are protected. This means you can shield your personal assets from corporate liability. However, not always. Most of the time, officers of a small business corporation will have to personally guarantee the debt.

LLC's are the better and easier choice if you're thinking of a corporation. However, not always. It depends on the nature of your business and how you intend to run it.

Partnerships, on the other hand, could be a good choice if you want to start your business with another person. However, each partner will be responsible for the others' debts and decisions. Do you want to be liable for your partner's bad decision? Do you know your partner and trust him/her?

Again, the issues are complicated. The best action is to talk with an attorney or tax accountant.

3. Do I Need A Business Plan? The answer to this question is again yes and no. Technically, you don't need a business plan to run a business. However, YOU WILL need one if you're going to apply for financing.

That being said, EVERYONE starting a business should have a business plan, whether you're seeking financing or not.

Successful businesses did not get that way by accident. A business plan will be your road map from the meager beginning to some point in the future. It will include your goals, marketing plans, sales and profit forecasts, and an analysis of your product. Most of all, having and BELIEVING a business plan will give you the confidence to more forward as you encounter problems and obstacles. After all, there is nothing better for motivation that knowing your goals and trying to reach them.

4. What Type Of Business Should I Start? This question cannot be answered by anyone except you. If you're thinking of starting a business, you probably have some ideas.

While I could go into the pros and cons of various businesses here, it would not be possible to cover everything you'll need to know. Search the web. You'll find out a lot.

My best advice can be summed up in 3 words: research, research, research. Did I say it enough? Research your product, the market for your product, how you'll attract customers, your projected sales and anything other relevant information from which to make decisions.

5. Do I Need A Lot Of Money? Again, the answer to this question depends on the business. To the one extreme, purchasing a franchise is VERY expensive, usually 5-6 figures. To the other extreme, an internet business can be started for very little money. In between there is a wide variety.

Of course, the more money involved, the more risk.

Many people think they can start an online business with no money or very little money because of information they've heard from the internet. Yes, an online business is very inexpensive in comparison to other types of businesses. However, money will be needed - for hosting, domain names, website creation, marketing, and more. How much money is determined by how much of the work you can do yourself versus hiring others. Again, no easy answer. Plan on needing some money.

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