What Issues Should I Consider When Starting a Business?

Are you considering starting a business or converting the legal formation of your business to a new legal entity?

If so, there are many considerations you should make when doing so. As a business owner, your success depends on your ability to navigate the many complications that arise when assuming an equity position. Are you asking the right questions?

What Issues Should I Consider When Starting a Business?

Personal Cash Flow Issues:

·         Will your personal cash flow needs change as a result of this new business?

·         Will you need to use personal assets to start the business?

·         Will your risk tolerance change for your investment and retirement accounts?

·         Do you need to review your emergency fund to ensure that you have adequate liquidity?

·         Do you need a contingency plan if the business does not grow as expected?

·         Do you intend for the business to be your sole source of income?

If you fail to integrate your personal finances and risk capacity into your financial plan when starting a business, you may end up losing the business altogether! Ask yourself: Am I prepared for the additional financial risk associated with business ownership?

Business Cash Flow Issues:

·         Do you need to research the amount of starting capital necessary to launch or run the business?

·         Will you need cash or financing to cover costs until you become profitable?

·         Do you expect income to fluctuate based on sales or consulting agreements (as opposed to predictable revenue)?

Legal & Business Formation Issues

·         Do you need assistance with deciding the legal structure of the business?

·         Do you need assistance choosing where to form the business?

·         Will the business have employees?

·         Do you need a business succession plan?

·         Do you have intellectual property to protect?

If the answer to any of the questions above was, “I don’t know” or “Yes,” you likely need to re-assess the legal structure of your business.

Without proper set-up, both your business assets AND YOUR PERSONAL ASSETS could be subject to the claims of creditors. Many business structures are also tax advantaged. Are you taking advantage of the most opportune business structure to minimize taxes?

Check Out Our Flowchart

To see our easy-to-read flowchart that will help you determine which business structure is best for you, click here. Always consult your advisor before forming any legal business entity.

Schedule Your Free Consultation!

Are you adequately mitigating the risks associated with establishing a business? If you would like to schedule a call to talk about best tax strategies, ownership strategies or other investment advice, please give us a call at 303-440-2906 or click here to schedule a time to speak with us.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

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