The final phase of starting a new business involves several administrative matters. With the business entity formed and registered, the physical facility ready, the new business owner must address outside professional support: banking, insurances, accounting and tax systems, and staffing. Some of these administrative elements significantly impact the financial health and management efficiency of the business.
While entrepreneurs lead their new businesses, they must recognize that they will need professional support to make business decisions. Bankers, lawyers, accountants, and insurance agents all contribute to the success of a business. The new business owner has most likely utilized some of these service professionals during the formation and planning of the new business; but, certainly should have these relationships in place when operations begin.
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Banking for a new business can include checking, money market, merchant, and credit card accounts. If the company participates in e-commerce, credit card or other Internet payment processing systems must be established. A good, long-term banking relationship is important to most businesses. With a strong relationship in place, the entrepreneur can address changing business requirements in a timely manner.
New business owners put their capital at risk and must protect their investment with the proper insurances. Business risks involve director and employee actions, physical damage to property, product liabilities, customer injuries, company vehicle accidents and more. Lawsuit claims can be devastating to a business – large or small – so don’t skimp here. The business may also need health insurance for its employees. For a small business a rider to a homeowner’s insurance policy may be all that is required when starting into business; however, a qualified business insurance agent is necessary to properly analyze and obtain a comprehensive business insurance package for most new companies.
Tax and Accounting Systems
A new business must have its accounting and tax systems set up when business commences. Accurate, timely financial information and tax filings will contribute to a more efficient operation, aid with management decisions, and avoid tax penalties. Computer software simplifies financial reporting, customer file management, bill paying, job cost control, and payroll processing. The type of business and accounting skills of the business owner will dictate the requirements for either an outside accounting firm, a basic in-house computer software, or a more complex accounting software system.
All startup businesses, other than sole proprietorships, must staff their operations. The basic options are direct employees (part-time or full-time) and independent contractors. Direct employment involves payroll taxes, workers’ compensation, and typically health insurance cost implications. While a business owner can avoid the administrative burden of these benefits with independent contractors, many businesses do not have jobs that meet the Internal Revenue Service’s independent contractor tests. Even if independent contractors are not an option, a business can reduce administration through a Professional Employer Organization (PEO) that takes on the role of employer. Keep in mind, however, that the cost of taxes and insurance are added to fee structure with either independent contractors or PEO’s. Quality products and services make a company successful and it takes well-trained, competent employees to produce and deliver these products and services.
Would you add anything to this list for a startup?