Preparing Your Finances for Business Ownership

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Happy owner of a cafe showing open sign.

YONKERS, WESCHESTER COUNTY, NY — June 20, 2022 — While starting your own business can be very appealing, leaving your current job to start a small business can be daunting if you don’t know what you are doing. It is essential to ensure you do everything possible to get set up for success. Knowing how to organize your finances can give yourself a safety net in case anything goes wrong.

Start with Business Finances

How you manage your business’s finances will set the stage for everything else. You will need to know how much money you have coming in, where it is going, and where you are getting it. If you mix your personal and business finances, it might be challenging to do this. Instead, consider opening a separate account to be used only for your organization’s expenses. You can use this to receive payments and cover the costs of operating. In addition, you can use it to keep an eye on how your money is doing. A separate account can be lifesaving when it’s time to do your taxes. Setting up a business can be expensive, so you may want to take out a small business loan to cover some of these expenses. There are Accion small business loans that can offer more than just the funds to start your organization. They also offer support, such as coaching and even professional education resources.

Understand the Legal Side of Things

Before starting any organization, it is best to understand the regulations and laws that will affect the company. Do you need to obtain a permit or license? This might be the case if you will have a physical location. These differ from state to state, and each town might have different rules. Working with an attorney to draw up all the papers is usually best. They can help you decide on the proper structure for the startup. A sole proprietorship is a common setup, but other options exist, such as partnerships or LLCs. These can offer many tax and legal benefits. Some come with fewer risks if things go wrong.

Create a Large Enough Emergency Fund

Everyone needs to have an emergency fund, and it is even more critical to have one if your income will not be stable. Cash flow issues are responsible for many startup failures, so preventing the issue can lead to success. For example, you may find that demand is highest at peak seasons and then dips down. If you have a retail shop, the business might be most increased around the holidays and much lower come January. Having enough funds to keep things going will be instrumental in preventing failure. It is often recommended to have at least six months of expenses, but you might want to put away more than that, such as eight to 12 months. Of course, you may not be able to do this all at once, so start small and gradually build up.

 

eHeziPreparing Your Finances for Business Ownership

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