Small businesses face many challenges in the business world with establishing and growing their business. While these challenges never really go away, companies can strengthen their hand by making smart financial decisions from day one which will significantly impact whether or not your business will succeed going forward. When you are first establishing your business consider the following factors to get your company on a firm footing.

Business StructureThe way that you structure your business can greatly impact the tax expense that you have as well as the personal liability that the owners have. For example, C Corporations have a double layer of taxation (on the entity and shareholders when they receive dividends), but this affords owners with an added layer of protection from litigation. S Corporations have no double layer of taxation but can only have a limited number of owners and cannot offer stock options to employees. Overall, there are many different considerations that a business should have when deciding on the structure including the number of owners of the business, plans for business expansion, and access to financing. A government grants for small business  should thoroughly investigate how they want to structure their company as well as the advantages and disadvantages of each structure before making a decision.

Developing Corporate Policies

Having formal documentation and policies and procedures can not only provide your organization with structure but also can limit the exposure that your company has to lawsuits. If your small business has experienced human resources and financial personnel on staff, be sure to dedicate time to developing formal policies and procedures. If not, consider hiring a professional firm to assist you with this as the risk of litigation from employees and other stakeholders can be greatly mitigated with this.

Find Financing and Form Budgets

Understand how your will finance your small business to minimize cash shortfalls and difficult financial decisions. There are different concerns and issues if you are planning to finance your business through debt, equity, or through operations and having a firm plan in hand for deploying and using these forms of financing is essential to succeeding in the business world. Businesses with debt will have to be organized for repaying the debt and reporting to lenders. Shareholders’ concerns will also need to be met and financial reports will need to be provided to them. If financing through cash flow from operations, then reserves for business downturns need to be available to protect your business through sudden shocks to your business. Regardless of how you finance your business a budget is an important tool for managing your cash flow and having sufficient capital on hand. Form honest and conservative budgets that allow for business contingencies.

By taking these steps and concerns into effect you will greatly improve the chances that you small business have for success.

Leave a Reply

Your email address will not be published. Required fields are marked *