Making the decision to work for yourself and start a business isn’t always an easy decision. There are many things that go into running a business, especially if this business is your only source of income.
Business owners have to make a number of different decisions when it comes to their business, and many of those decisions start before the business is open to the public. Here are just a few of the considerations business owners must make.
Which Business Structure to Form
There are five common types of business structures, and all business owners must determine which type of business structure best suits their business. The type of business structure you choose affects things like:
- Ability to raise money
- Day-to-day tasks
- Personal liability
- Required paperwork
Businesses that are considered independent from their owners are called corporations. This type of business has more regulations to comply with, making it one of the most complex business structures.
Limited Liability Company (LLC)
LLCs are the most common type of business structure and are best for medium- to high-risk businesses. Forming an LLC allows you to protect your personal assets and pay lower taxes.
As the name suggests, partnerships are when two or more people own a business. There are two types of partnerships: general partnerships and limited partnerships.
An S corporation is a special type of business structure that gives business owners the same liability protection as corporations but with more tax benefits.
In this type of business structure, one person owns and operates the business. This is the least complex of all the business structures, and it works best for low-risk businesses.
What Type of Business Loan to Apply for?
Starting a business isn’t always going to be cheap, though some types of businesses can be less expensive to start up than others. Either way, applying for a small business loan can be helpful in supplying you with the funds you need to get your business started. The most common type of business loan is an SBA (small business administration) loan, but there are other types as well.
Business Lines of Credit
This type of loan is actually more similar to a credit card, where you’re allotted a certain amount of money. Once you’ve paid back what you’ve maxed out, you can withdraw more money. This is a good option for those who aren’t sure how much their business expenses will be.
Commercial Real Estate Loans
This type of loan is specifically for the property. Apply for this type of loan when looking for a space for your building or if you’re expanding from your current location.
Some types of businesses require expensive machinery and equipment to run the business, and an equipment loan is great for purchasing these necessary items.
Business Payment Processing Options
The main goal of a business is to make money, and you’ll have to decide how you’re going to receive payments. Certain types of small businesses may be able to accept cash-only payments, but it’s better to go digital and keep up with technological trends.
Automated Clearing House (ACH) Payments
If your clients must pay more frequently or in large amounts, consider accepting ACH payments. This allows for a quick transfer from one bank account to another.
Credit cards are still a widely accepted form of payment and can be used both in-person and online. Just make sure that you have a secure way of accepting credit card payments.
Other Payment Methods
Many small businesses choose to accept payments through apps like Cash App, PayPal, and Venmo. However, this method of payment is typically used by lower-risk businesses.
How Much Business Insurance to Get?
Businesses need insurance in the same way individuals do. Insurance protects a business (and individual) from a huge financial blow in the event of a loss. Some parallels between individual and business insurance are commercial auto insurance (similar to personal car insurance), commercial property insurance (similar to home insurance), and workers’ compensation insurance (similar to disability insurance for individuals).
General Liability Insurance (GLI)
All businesses need GLI, as it protects businesses against claims of bodily injury and property damage to others.
Errors and Omissions (E&O) Insurance
Also known as professional liability insurance, this protects businesses if they make an error in the service they provide.
Commercial Umbrella Insurance
This extends the limits of other business insurance. For example, if a claim costs more than the original insurance can cover, commercial umbrella insurance will cover the rest.
Business Income Insurance
In the event that you have to close your business down due to property damage, renovations, or pandemics (make sure this is stated in your policy), the policy will replace lost income.
Although many decisions must be made before a business opens its doors, the decision-making process doesn’t stop there. A successful entrepreneur knows that he or she must always make decisions regarding their business, and they also know how important these decisions are.