For many entrepreneurs, the prospect of starting their own business inspires a mix of both excitement and fear. Being a business owner offers the opportunity to be your own boss and make your dreams a reality. But it also offers the opportunity for mistakes and potentially failure for which you are ultimately responsible.
Often new entrepreneurs come into the business world with a lot of ideas and expertise in a particular subject but often lacking in actual business acumen. In the role of employee those deficiencies are usually mitigated by having others who handle the business side of things, but when you’re starting out on your own there isn’t that expertise to fall back on. And that gap in knowledge can have consequences, as early-stage business mistakes can have long term repercussions.
Starting a business isn’t as simple as opening your doors and producing your product. To do it properly, it involves the tedious and far less romantic prospect of filling out paperwork and minding small details. And even doing all that offers no guarantee of success. But making sure you’ve gone through the necessary steps of business formation can help prevent making critical errors at the outset, which is as much as any entrepreneur can hope for.
Have a business entity
Before thinking about things like logos or offices or even a name, the first thing you want to do when starting a business is setting up a business entity. More than just a sign to the world that yours is a real business, having a business entity can prevent entrepreneurs from losing everything in case things go wrong.
A business entity enables founders to keep separate their business debts from their personal assets. While no one likes to contemplate the idea of failure, having the protection a business entity guards against losing everything should your business go under. In business it’s impossible to plan for mistakes or disaster. Despite your best intentions and efforts, you may find yourself facing down a lawsuit from a customer who was done some sort of harm from an error on your part. Facing such a situation without a business entity would leave all your personal assets vulnerable to that legal judgment. Given how much risk is already involved in running a business, it’s foolish to take on the additional and unnecessary risk of not establishing a business entity.
When looking to form a business entity, the average business owner probably has little idea about the different types of entities available. A few of the common types of entities are
One of the imperatives when starting a business is to try and stretch your budget as far as possible and save money wherever you can. That often leads to entrepreneurs trying to DIY as much as possible in the early days. But when it comes to getting a business entity, trying to handle it yourself can be a mistake. You aren’t afforded any fixes or do-overs once you’ve created your entity, so doing it right the first time is essential. While it can be hard to stomach paying an attorney’s fees while on a shoestring budget, the cost in an investment in the peace of mind in knowing it was done correctly.
Get the insurance
Another unexciting yet critical area of focus during the early stages of your business is making sure you have the right kinds of insurance for your business. Again, thinking about worst case scenarios in the early, hopeful days of your fledgling business is never a fun task, but having the right insurance will help keep your business going in the case of a disaster. Insurance policies for things like comprehensive general liability of key persons are an essential preventative against a sizable bill that you don’t have the resources to pay. When looking for insurance policies, it can be helpful to reach out to local business associations or business groups to see if there are group discounts available.
While things like forming a business entity or getting business insurance aren’t the most exciting tasks and certainly not what you went into business to do, they are nonetheless crucial chores when getting your business off the ground. It is these mundane but vital chores that allow entrepreneurs to pursue their bigger goals and ambitions. Taking a break from matters of design and strategy to set your business on a solid foundation is time well spent.