All startups will face hiccups, and all new businesses will inevitably have to do some damage control. This might seem unfortunate, but it’s completely natural. However, as the owner of a startup with amazing potential, you do need to stay prepared for these hiccups. There are some mistakes that are almost impossible to come back from, should you not address them immediately.
We’re going to go over some of the common mistakes made by novice business people and discuss how you may be able to avoid them from the get-go.
Not Getting Your Legal Ducks in a Row
The best list of legal things to take care of comes from American Express’s OpenForum. To summarize the points given, choosing a unique name and registering it as a DBA (Doing Business As) should be your first step. Then you can move on to incorporating your business or forming an LLC.
After this, according to the OpenForum writer, you have a business. However, you’re not protected yet! Next, you must:
- Obtain your Federal Tax ID number so the IRS doesn’t come after you
- Prepare for your first hire by understanding and researching employee laws
- Seek out the proper permits and licenses to operate properly
- Set up trademark protection for your brand.
- Open a business bank account.
It’s so crucial to get these steps out of the way early because they are so often what gets businesses in trouble if they haven’t done them early on.
Screwing Up Your Taxes
If there’s any surefire way to ruin your company, it would be not doing your taxes correctly. Particularly, you want to be aware of employment taxes, health insurance taxes, credits and deductions unique to small businesses.
In short, the law requires businesses to withhold federal income tax, social security, and Medicare taxes from employee’s pay. Additionally, all businesses have to pay the Federal Unemployment Tax out of their own funds.
Now, even though you have to pay your hard-earned money for taxes, there are some really easy deductibles to get a hold of. The Work Opportunity Tax Credit, automobile expense deductions, and professional fees paid to tax law experts for advice are among said deductibles. You may want to consider seeing a tax law expert to help you decide which expenses can be claimed as business deductions vs. hobby expenses.
Note: I want to clarify about the Health Insurance Taxes, because due to the newest presidential cabinet and administration, the Affordable Care Act may not be used in your state any longer. You’ll have to check what kind of benefits you are required to give your employees from now on and how that affects your taxes.
Not Protecting Yourself
Small businesses get a lot of attention from hackers and those with ill intentions because they’re typically less protected. They think “what do people want to take from us?” but don’t realize that having less can make them more of a target.
Hackers know that small, startup businesses are not usually protected as well as they should be. But this isn’t how it should be! Identity theft and credit card theft become possible when employee information and financial information are easily findable and unprotected.
Apart from that, something that will cost you a pretty penny but is extremely worth it is getting business insurance. The Hartford’s Business Owner’s Playbook put together a good guide for the kinds of insurance you can purchase as a small business. It lists general liability insurance, commercial property insurance, workers’ comp, and a few others as the most crucial kinds of insurance for a startup. Read it, study it, and do what it says.
What mistakes have you seen or experienced that desperately hurt an otherwise well-functioning small business? Have you ever had to work hard to come back from any of these things? We’d love to hear about it. Please leave a comment and tell us your story below!