Starting a new business can be an exciting process, but the responsibility associated with your new venture can be overwhelming at times. As you probably have read/heard before, it is imperative that you surround yourself with competent people who can assist with avoiding common pitfalls. Below is a list of ideas and suggestions to consider when striking out on your own:
- Organizational structure – careful consideration should be given to your new organization’s legal structure. Limiting liability and protecting personal assets is a common concern among new business owners. Limited Liability Companies (LLCs) and Corporations are common entities formed in order to shield personal assets from business debts.
- Open a seperate bank account – keeping business funds seperate and apart from personal ones is a must when operating a business. This will make for smoother and more cost effective tax preparation come year end. Furthermore, it is the cornerstone for establishing a set of books for the business.
- Keep good records – maintaining records of business activity is another essential business practice for a myriad of reasons. Accountants may require bank statements, check stubs, payroll records and filings, credit card invoices, and sales receipts to prepare financial statements and tax returns. Keeping this information in orderly fashion will save you precious time and money (not to mention fewer headaches) in the long run. Best practice is to use “off-the-shelf” software (i.e., QuickBooks), so your information can be easily stored, backed-up, secured, and transferred to members of your team. Check out my QuickBooks resource page for tutorials on using the software, and become a more effective bookkeeper.
- Rollover Retirement Accounts – retirement accounts from previous employers can generally be rolled over into individual retirement accounts(IRAs). These rollovers are tax free as long as they are rolled over into a qualified plan. However, tax and penalties can be assessed on early withdrawal of these funds. Consult your tax advisor before making a final decision on rolling over or withdrawing funds from a qualified retirement plan with a previous employer.