SUCCESSFUL STARTUPS - WHAT TO CONSIDER.
With the recent increase in unemployment and the uncertain job market, business startups have grown rapidly over the past few years. Some may launch a new business venture, others provide the same or similar services creating competition with their previous employers. The primary difference is a business venture begins at the conceptual stage, while a startup business provides the same service at a later stage of business development.
Startup businesses have three distinct elements:
- THE VIABILITY OF THE BUSINESS
This involves the analysis of financial data provided by the client. Consideration should be given to the method and source of funding, evaluating assumptions and preparing a prospective financial statement.
- THE LEGAL FORM UNDER WHICH TO OPERATE
This decision should not be made lightly, but should be decided after a thorough understanding of the tax and non-tax advantages and disadvantages of both. Choices include corporations (regular, S, and personal service), partnerships, (limited and general), and sole proprietorships.
- OPERATIONAL CONSIDERATIONS
Here are just a few task that you should consider and at what point they will need to be addressed:
Where will my business be located?
For many new businesses, the choice has been an economical one; a home office. While an option for many new startups, the IRS has strict rules that must be followed in order to take advantage of deductions.
Does my business require a license?
Depending on the industry you are in, you made be required to or may find it advantageous to obtain a license. Often times, those who decide to operate out of their homes, are required to obtain a license or permit from the city or county. This is need to insure adequate parking exists and for the safety of residence.
Will I need to hire employees?
When hiring employees, a number of considerations need to be addressed: a) if I have a home office, where will they work? What is my liability should an employee get injured at my home? b) How do I determine if the worker is an employee or an independent contractor? c) and what steps do I need to take to make sure I am meeting all federal and state regulations? These concerns are valid and should be discussed with your CPA in order to ensure compliance.
What accounting software should I use?
Often times new business startups fail to evaluate their need for software resulting in either unnecessary complexity or hardware incompatibility. Aside from software selection, business owners now have the option of either housing the software on their own computer or purchasing a license and accessing it virtually. As there are advantages and disadvantage to both, business owners should consult with their CPA in order to determine the right choice for their industry. Remember; the reason you are using this software is not only to provide you with detail accounting records, but also for the preparation of your federal and state income tax returns.
Although having touched only on a few decisions facing new startup businesses, there are many others the warrant your consideration. As a service to my clients, providing a detailed analysis of their goals and objectives in the forefront, will save time and money as the business grows and develops. If you are planning to start your own business, I encourage you to consult with your CPA to evaluate whether doing so, will result in the accomplishment of your goals and objectives.
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