I am a believer in “self-help” and telling my clients in business or thinking of starting a business where the potential risks are. Part of being successful in any business is not stepping on what I call the “land mines” in the path of having a profitable business or at least one that does not create financial problems for the entrepreneur.
All businesses have risks. If we worried only about the risks and not the rewards of owning your own business and its profits, no one would ever open a business. Smart, successful business owners acknowledge the risks exist. Then they manage or try to minimize these problems by following a few guidelines. You may have a great product or provide excellent services. Positioning yourself to be successful is the other half of the battle. Here are some of the guidelines:
1. Keep your business finances separate from your personal finances.
- Form a Limited Liability Company (LLC) or a Sub-Chapter S Corporation.
- Get both a Federal and a NJ Tax Identification Number (TIN).
- Open bank account(s) in the name of the business. Clearly show that it’s the business writing checks and incurring debt, and not you, personally.
2. Be wary of giving personal guarantees.
Personal guarantees put you and your assets “on the hook” for payment of debt related to the business even if you operate as an LLC or S Corporation. A personal guaranty is just like co-signing a loan. Would you co-sign a loan for someone who could not or might not pay it back?
3. Talk to your accountant and insurance advisor.
They are not just “salespeople” trying to sell you something. They are professionals. They are licensed and regulated by the State of New Jersey. They have valuable knowledge. These professionals have useful information and offer sound advice. Good ones will not sell you what you do not need. Good ones will tell you the best way to form, organize and protect your business, your personal assets and yourself. For example, if you have employees, then you MUST have Worker’s Compensation Insurance.
My next post will focus on things to keep in mind to protect yourself from customers, lenders, vendors, and landlords.
I encourage you to contact me to discuss issues related to your current business or the one you are thinking about starting.
Do you want to know more? Please contact us.