How Do I Start A Business?

Answer:
When thinking about starting a business, the first

step is to find something that you are passionate about. The worst thing that you can do is simply to chase dollar signs. If you focus on something you are passionate about, you will make money, but a business that is only about money will almost always fail.

Once you have decided on a business activity that you want to pursue, now it is time to decide on a business structure. There are many types available to you, including sole proprietorship, partnership, and corporation. A corporation will offer you the most liability protection, although it is expensive to set up and will involve additional taxation, as the corporation will be taxed on profits, and you will have to pay personal income taxes on any money you pull out of the business. A partnership is another option to split the risk, but then you no longer have sole control of your company. Additionally, if your partner were to file for bankruptcy, then you are liable for the entire debt of the company. In most cases, unless you are in a business where the risk of lawsuit is high, a sole proprietorship is the best option. In order to do this, you simply choose a company name, and then set up a business checking account as a “DBA.” All of the profits will be taxed at your personal income tax rate. However, any company debt is considered to be personal debt. There will be no corporate veil between personal and business liabilities.

If your business is a service-type business, you won’t need to worry about inventory or an office location. You can work this type of business from your home without the additional expense. However, this type of business is more labor-intensive, and your income is limited by the amount of labor that you can put into it. An inventory-based retail type business is only limited by the amount of product that you can move. There is a larger potential income from the same amount of labor, but there is additional risk of the inventory that you must keep on hand, tying up your cash flow.

Above all, try to limit your debt as much as possible. The best option is to keep the business running debt free, even if it grows slower, as the less debt you have, the more freedom you have to do things to make money.