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5 Common Mistakes When Starting a Business
It never ceases to amaze entrepreneurs how certain seemingly simple decisions, made during the early years of their business startup, can become fatal errors down the road. After meeting with many business owners across a broad spectrum of industries it’s common to find them enduring the consequences of the same, or similar, errors over and over again. In most cases these early errors become very costly when it comes time to sell the business. In some cases they are fatal.
Formation — the Legal Structure of your BusinessIf you are thinking about starting a business, or if you’re a serial entrepreneur adding a new line of business, one of the first things you’ll have to do is to determine your business legal structure. The four most common types and basic forms of business legal structures in the United States include:
- Sole Proprietorship
- Limited Liability Company or an LLC
Bank LendingEntrepreneurs growing a business from Startup, to Main Street Small Business, to Middle Market, to an IPO typically turn to local community and regional banks, as well as Credit Unions, for business capital. Such loans are offered to businesses based on three factors known as the three C’s in bank lending:
- Cash Flow
- Credit History (or Credit Score)
Setting Up Multiple BusinessesIn part one of this series, we discussed the various options to incorporate multiple businesses while keeping each business as a separate entity. It’s worth noting that having a separate legal business entities can be costly when it’s time to file your taxes as most CPAs charge an additional fee to file each business entity’s tax returns. Additionally, you may want to develop a line of businesses that are closely related in terms of the products and services offered, the industry, or even its customers. In such a case, it may make good sense to create a single brand that will unify the various business operations. Marketing can be simplified under this type of multiple business structure and the businesses could flourish under a unified brand. If you find your future plans include the addition of similar lines of business to your existing business (or the business entity you are about to form), there may be a simple way to structure multiple business entities which could reduce tax filing costs and administrative time in the future. Read more…
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