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New business startups are challenging and adventurous, with a multitude of factors to consider. If you plan to grow your business or sell it someday, it is important that you run it right from the beginning and operate within the confines of the law. The basics steps involved in starting a new business are not difficult to find. For example, an article on Forbes tells you how to go about it in 8 key steps. The Small Business Administration also provides step-by-step instructions. However, certain new business tips, although equally important, are frequently overlooked.
Commonly Overlooked Tips for Business Start Ups
Get the insurance coverage your business needs. According to an article on Forbes, a small business owner may need any combination of 13 different types of insurance. A business owner’s policy (BOP) combines coverage your business needs in one package and typically saves you money. A BOP may include property insurance, auto insurance, liability insurance, crime insurance, and business interruption insurance. Depending on the type of business you have, you may also need errors and omissions professional liability insurance, workers’ compensation insurance, directors and officers insurance, data breach insurance, or other types of coverage.
Set up your general ledger properly. You can buy off-the-shelf software for this purpose, but according to an article on Entrepreneur, you should carefully consider your initial financial setup in order to fully understand your company financials and for future proof of the value you have built in your business. It may be in your best interests to hire an accountant to set up your books initially.
Keep careful records of your expenses. As covered in the Entrepreneur article, it is important to understand the extent of the items you are allowed to expense in your business. Keep all your receipts and meticulous records. This will help you with audits and due diligence of future potential buyers or investors, and enable you to reduce your taxable income without hurting the value of your company.
Keep business and personal expenses separate. A range of expenses meet generally acceptable accounting principle (GAAP) standards and it is perfectly legitimate to use business funds to pay for them. Using business funds for personal use, on the other hand, can get you in trouble with the IRS and expose you to liability, as covered in the Entrepreneur article. If you paid for personal expenses with business funds, it would be difficult to separate them out if your company was being valued in the future. The best policy is to keep personal expenses out of the business from the start.
Report all company revenue. If you are doing business in cash, it may be easy to skim money off the business, but that would be unadvisable. It could get you in trouble with the IRS and reduce the value of your company in the long run. It would be difficult to establish the value and growth of your business if you were not reporting the correct numbers.