Little-Known Facts About Going into Business for Yourself

The thought of establishing a business is not only exciting – it can also be a little intimidating. For instance, business owners need to establish what is known as a business credit file. Your personal credit file is generally associated with your business credit, at least at first, and it is how lenders decide how credit worthy you are. So, needless to say that getting business credit as a new business owner is quite challenging and often very expensive. While the United States is still looked at as the land of opportunity, starting a business isn’t as easy – or cheap – as it first seems. Here are some facts about going into business for yourself that you might not be aware of. Knowing this information can save you cash, headache, and time.

Becoming a Business Owner Opens You Up to New Liabilities

After a person goes into business, they have to start paying different types of taxes. If they are regulated by any particular industries, then they might need to start reporting to certain agencies such as OSHA and even the Department of Transportation. And if they are found in violation of any of rules or laws? They could be responsible for fines and penalties steep enough to necessitate legal help. Being a business owner can mean that your company becomes well known and earns a lot of money, but being in charge of your own business doesn’t mean that you don’t have to answer to someone else.

Setting Up the Wrong Business Entity Equals Unnecessary Costs

As soon as you become a business owner and you start offering products or services, your liability risk skyrockets. Business owners assume the risk of lawsuits from employees, business partners, and customers alike if they don’t set up the correct type of business entity. Establishing a sole proprietorship is the simplest and usually the cheapest form of business entity to form, but it also assumes that the owner takes all of the risk. S corps offer the best form of protection to business owners operating domestically and internationally. Creating a C corporation business entity is fairly standard for larger companies with more than 10 to 15 employees that make millions of dollars in annual sales. Applications for S and C corps are fairly complex, are more expensive to file, and require more paperwork than other types of licenses as well.

You Can Legally Become a Business Owner Before 18

To sign up for the military, you need to be at least 18 years old, or at least have your parents’ permission. Want to have a beer? You need to be 21. If you want to set up a business on the other hand, you just need to have the filing fee. In actuality, local jurisdictions in various towns and cities are the ones that approve business license applications. So, the city of Boca Raton, Florida, might approve a 12-year-old’s business license application, but the town of Sayreville, New Jersey, might reject the application of a 14-year-old. Either way, there are no age restrictions on business licenses, so a younger person would definitely be able to get their application approved eventually with a little tenacity.

It may seem strange to you that it is not easier to just pick a business entity at random and start operations immediately, but having rules for potential business owners is a good thing. It means that fewer ‘fly-by-night’ and unscrupulous people can open up shop wherever they want it. Having a high bar for budding business owners also means that they are going to be mentally sharp and have a competitive edge to them.

 

Disclosure: This is a collaborative post and the author’s views here do not necessarily reflect those of the blog owner.