In troubled economic times, and in booming economies, too, owning a business offers a degree of freedom that other types of employment don’t.
Because they can’t.
Business Ownership: a Form of Freedom
Why is owning your own business so appealing? What’s so great about it?
Calling the shots is a fantastic adrenaline rush. It’s great to have complete control and steer your own boat. And it’s more than that.
It’s about creating something and filling a need—with the freedom of knowing that if the need changes, you can make the necessary adjustments to keep filling needs and making a profit.
Your Small Business and the Economy
Acccording to JP Morgan Chase, “Small businesses accounted for 45 percent of GDP in 2010.” This figure is actually down from the 1990s. But it’s still an impressive chunk of the American economy.
Also according to JP Morgan Chase, just under half of all US employees work for small companies, defined by the SBA as “an independent business having fewer than 500 employees.” The Small Business Administration also wants any small business to operate for profit.
Your corner Mom and Pop store is a small business. But there are plenty of small business owners who don’t necessarily fit this more classic model of business ownership.
Your friend the freelancer has a small business. And your buddy the truck driver? He just might own a small company, too.
Together, these businesses account for just under 2/3 of new jobs. If that’s not a major economic driver, then I don’t know what is.
Business owners need to be intentional to avoid most personal liability and having to pay too much in taxes.
Start Your Business the Right Way
What’s the “right” way to start your business ownership journey? It begins with a business idea and researching potential customers. An electric spaghetti twirler, while a quirky idea unto itself, is not likely to be where future clientele will want to put their money. Particularly in uncertain economies, a new business needs to offer products and services that customers feel are necessary.
For budding future entrepreneurs not sure where to start, here are some quick tips for properly getting a new business started while maximizing freedom now and later.
A Business Needs to Start With a Fundable™ Foundation
An unprepared entrepreneur won’t remain an entrepreneur for long. Get organized now, to enjoy far more unfettered business ownership later.
A Fundable Foundation is an absolute must if you believe your business will ever need to borrow money. Borrowing to cover business purchases or any other expenses is pretty typical for nearly any type of business.
It All Starts With Your Business Name
A business name must be memorable and, when you incorporate, it must be unique. But it doesn’t need to contain the name of your industry.
It’s a matter of risk. Certain industries, by their very nature, are considered risky. But a life coaching company doesn’t need to be conducted while hang gliding in order to be risky.
Why is it risky?
It’s risky due to the ease with which people get into such a field—often with minimal startup costs. If it’s easy to get into business, then it’s just as easy to end up out of money and out of business.
Hence an online store can be as risky as a business that manufactures and services chainsaws.
Business Particulars: Address, Phone Number, Website, and Email
… or not.
Even if your business is purely online, you need an actual brick and mortar address, where mail can be received. Hence a PO box for your business won’t cut it.
Having a separate business phone number appeals to lenders and credit issuers. It shows you’re permanent. And for the sake of your own personal freedom, it means you can send off-hours calls to an answering service—and get some well-deserved sleep.
Since many business lenders and credit issuers will check your company online, you need an online presence. A Facebook page alone isn’t enough.
Why Isn’t a Facebook Page a Good Enough Online Presence for a Business?
If you’ve ever been in Facebook “jail,” then you know what I mean—moderation by bot. FB doesn’t always get it right. Do you want your business and its presence in customers’ feeds to be dictated by an overzealous bot?
For anything questionable, keep it on your website only, and avoid the wrath of the bots.
Your own website (with email on the same domain) also means far more varied promotional opportunities. You’re free of FB’s structure, to advertise and design the way you want.
Customers and prospects will research any business online. Would you rather have them learn about your business at your own website, or on the mean streets of Facebook?
The Freedom of Getting an Employer Identification Number from the IRS
You may not think of freedom and the IRS together. But an EIN means your business has its own identity. It can build business credit and handle its own tax returns. An EIN frees you from being joined at the hip to your business.
The Freedom of a Business Bank Account
A business bank account is less a gateway to freedom, and more like a necessary stop on the way. Lenders and business credit issuers will probably require it. And, it helps keep you from commingling funds.
Your Business Plan: Freedom That Comes From Structure
There are over 100 more aspects of Fundability. But these should get you started.
With Great Power Comes Great Responsibility — Don’t Add to it With Personal Liability
Owning a business can mean treading a perilous path where your personal credit and personal assets are on the line. But that doesn’t have to happen.
An entrepreneur who incorporates avoids these issues. Even a sole proprietorship and a limited liability company should incorporate. This type of business structure isn’t just for an enormous business like Apple.
Even a sole proprietorship where the owner ia the only employee should incorporate.
Make Sure Your Successful Business Doesn’t Stick You With Higher Taxes
Incorporating is the best legal structure. According to the IRS, “The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.”
Business ownership means paying yourself a salary. And, yes, you withhold taxes, just like an employer would. There’s no free business ride when it comes to taxation. Working closely with an accounting professional can help you save on both personal and business taxation. Their services are well worth the cost.
The freedom of owning a business doesn’t happen overnight. But you can get there with planning and ingenuity. Credit Suite‘s mission is to empower businesses with new opportunities for growth. Let us be a part of your freedom and success.
Janet Gershen-Siegel is the Content Lead for Credit Suite. Her responsibilities include daily blogging, creating weekly webinar content, and writing articles about business credit.She has been admitted to practice law for over 35 years, with a focus on litigation, and is a published author, with writing credits at Entrepreneur, FedSmith.com and BusinessingMag.com.She has a BA in Philosophy from Boston University, a JD from the Delaware Law School of Widener University, and a MS in Interactive Media (Social Media) from Quinnipiac University.She regularly writes for Credit Suite, which helps businesses build credit for their EIN, and get approved for loans and credit lines. Her specialties: business credit, business credit cards, business funding, crowdfunding, law, and social media