There are key steps, risks and opportunities that should never be overlooked when someone first begins to consider starting a business.
Initially, most successful businesses have a business plan. The plan need not be extensively detailed, but the plan may be. The plan is usually in writing and includes near-term and long-term projections on people, activities, income and expenses. Rhodes State has a small business development program that helps entrepreneurs create business plans, and examples of business plans can also be reviewed on the internet.
If the business requires financing, the business plan is a crucial component of getting financing, even if the financing is from friends, family or business contacts rather than from traditional lenders. Sometimes, exploring a business plan with a potential investor (professional lending institutions such as a bank or even an individual) can help the entrepreneur position the new business for financing later, by learning what benchmarks and criteria various investors expect to see before making investments.
Contemporaneous with exploring or securing financing, many businesses will be best served with a legal entity. Although small business support programs and various internet-based suppliers can help in officially starting a limited liability company or corporation, an entrepreneur is almost always best served in securing the services of a local lawyer to help in establishing a business entity. There are many legal aspects to establishing legal entities that are individual to each entrepreneur. Attorneys go to law school for a reason, that reason is at least in part learning how to sort through what should and what should not be considered and included in various contexts, including entity creation.
The biggest part of entity creation that attorneys assist in is in developing the rules that govern the entity. For LLCs, the “rulebook” is called an operating agreement, and for corporations, the rulebook is called “regulations.” These rules describe the various roles that multiple owners in the business can and will undertake. Even if a business has only one owner (for LLCs, that owner is called a “member” and for corporations, that owner is called a “shareholder”), the liability protections that the entity provides to the owner (a primary reason for a legal entity being used) will be created, amplified and clarified in the entity’s rulebook.
Along with entity creation, every business owner (formal owners and informal owners) needs a qualified accountant. That accountant should be hired about the same time that the attorney is hired, and the accountant needs to have background and education in giving business financial advice. That accountant need not necessarily be a CPA, but the accountant should have more experience than just tax return preparation.
Similarly, almost every business has risks that insurance is designed to minimize. While hiring an accountant, also find an insurance agent with experience in advising small businesses.
Thereafter, those professionals can help the business identify what licenses (vendor’s license, etc.) and insurance coverage the business may need and explain how to properly report and pay taxes, which is different for businesses and individuals.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.