Five Steps to Establish When Starting a New Business
While the pandemic has forced many businesses to close, it has also created a multitude of opportunities for the creation of new businesses entering the market. In fact, the U.S. Census Bureau reported that the number of new business applications started rising about six weeks into the pandemic and the third quarter of 2020 was the highest quarter of applications ever received.
The decision to start a new business never comes lightly. And during the current economic times, the additional stress can be even more overwhelming. Nevertheless, the key to a successful business launch is to have a strategy in place from day one. Having a well-thought-out plan for your business needs, and the right team by your side, can make all the difference. Here are some steps to keep in mind to alleviate some of the new business stress and ensure you have given your business every opportunity to succeed:
Work with a Team of Professionals
At a minimum, you will want a CPA, an attorney, and a banker to rely on for advice. Partnering with an experienced team will give you the guidance and knowledge you need to help you with important and critical early business decisions. Items such as entity set-up and structure, funding, and record keeping are just a few of the many items that you will want to consult an experienced professional about. Do not hesitate to ask questions and seek guidance.
Selection of a Legal Entity
You will want to know the pros and cons of each type of entity and if a Sole Proprietorship, (P)LLC, S Corp, or Corporation makes the most sense for your operations. There are also various agreements and forms that will need to be filed for both Federal and state purposes. These forms will ensure you are in compliance and your entity is structured the way you intended for both liability and tax purposes.
Set-Up Separate Accounts
Before you begin to collect receipts or pay expenses, you will want to establish bank accounts and credit cards that are strictly for business use. Having a relationship with your banker will also be helpful. It will be particularly useful when obtaining an initial funding source or lines of credit.
Utilize Recordkeeping Tools
Whether you will be utilizing QuickBooks or a more industry specific software, you should be tracking your financials right from the start. You may want to enlist the assistance of an accountant that can help you establish a chart of accounts. Trying to go back and compile this information after the fact can be stressful and lead to inaccuracies. In addition, you will want to review and analyze your results periodically so you can predict future growth and strategize for the future.
Do not forget to hold on to all business-related documents and agreements. Most recordkeeping software has the capability to upload related documents for electronic retention. You never know when you will need to refer to the initial source document, especially in the event of an audit.
Establish Proper Accounting Procedures
Handbooks are a good tool to have to properly outline accounting procedures. It also ensures expectations are known. Having the correct internal controls in place ensures you have the proper segregation of duties, as well as checks and balances. Having fiscal policies and procedures in writing will help to eliminate errors or prevent fraud.
Starting a new business can be very satisfying! However, success does not come without hard work and organization. The more thought out your business plan and procedures are up front, the greater likelihood you will succeed. With the right team by your side, you will be able to eliminate some unnecessary stress and frustration. We are always here to be a resource to you as you start and grow your business. Do not hesitate to reach out to us to assist in putting together a team working for your best interests.
Contributing Author: Shannon T. Forkin, CPA, CGMA, is a tax partner with over 16 years of experience in all areas of income taxation to a variety of clients. She concentrates in working with nonprofit, healthcare and professional service clients and provides strategic tax planning relating to taxation issues influencing these industries. Shannon specializes in all areas of corporate and individual income tax compliance, including multi-state taxation.