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Answers to Common Business Startup Questions – Daily Local

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How should a company be legally structured? How much does it cost to get started? These are the most frequently asked questions when helping new businesses with business accounts, commercial lending services and small business loans. Let’s dive in.

How should a company be legally structured?

Choosing the right business legal structure, or business entity, is an important part of starting a business. At the federal level, the legal structure of the business determines the tax burden. At the state level, liability can be affected. For example, an LLC (Limited Liability Company) structure can protect your personal assets in the event of a lawsuit.

A sole proprietorship is the simplest business structure. It is her one person who is responsible for all business profits and liabilities. This is the easiest entity to set up and dissolve. A partnership is owned by two or more persons. There are general partnerships, where the business is shared equally, and limited liability partnerships, where one person controls the business.

A Limited Liability Company (LLC) protects its owners, partners, or shareholders from personal liability for business debts unless they negligently cause damage to others. Finally, a corporation is separated from its owner. You can sue, be sued, own, or sell company property or shares. There are many different types. This includes C, S, and B corporations, as well as closed and non-profit corporations.

Sole proprietorships, partnership owners, and S corporation owners all classify their business as personal income. C corporate income is classified as business income. For more information regarding your personal situation, be sure to consult your tax and legal advisors to determine which legal structure is best for you.

How much does it cost to start a business?

The first step is to calculate your initial costs so that you have an idea of ​​the funds you need. This also helps in estimating profit. Start by identifying all start-up costs, including licenses and permits, professional services (lawyers, accountants, etc.). Market research; office space or buildings; insurance; equipment and supplies; technology; software and other subscriptions. Communications; Utilities; Employee Payroll; Taxes; Inventory and Signage.

Start-up costs for different businesses can vary greatly. For example, the cost of starting a one-man home business is dramatically lower than starting a brick-and-mortar business with 20 employees and lots of inventory. Add up all potential costs to get the full picture. Break down costs into one-time expenses and ongoing expenses such as rent, salaries, and utilities. You need a monthly fee for at least a year to get started, but more is recommended as it can take time to turn a profit. You may also face unexpected expenses.

What is the biggest challenge you face when starting a business?

Knowing in advance the challenges you may face will help you prepare better. Here are his four common challenges when starting a business.

Lack of capital and cash flow: Poor planning of expenses and lack of income can be disastrous for new business owners. If you don’t have enough capital in place, you can quickly run out of cash. Plan well and secure enough funds to cover all your needs while you develop your business. Note that most businesses are not profitable in their first year of business.

Lack of Demand: Prior market research helps you better understand the market for your product or service. Before you start, you need to make sure there is demand for the product or service you offer.

Financial Management: Poor financial planning is one of the main reasons new businesses fail. If your costs exceed your returns, prepare to fail. Make sure you have enough start-up capital to get your business off the ground.

Hire top employees: The talent you hire is often the success or failure of your business. Take your time and hire the right people for your team. You are looking for people who have experience in your field of business and who share similar values. Most importantly, take the time to understand their strengths and weaknesses.

Rebecca Worthington is the Vice President of Community Relations for Benchmark Federal Credit Union. Benchmark FCU ​​is the only federal credit union to serve only Chester County, has been serving the community for over 80 years and is known for providing exceptional service. For more information on the products and services available with Benchmark FCU, please visit the website. Everyone who lives, works, worships, or attends school in Chester County, Pennsylvania is eligible to join the Benchmark Federal Credit Union.