5 Accounting Decisions You’ll Face When Starting Your Business
It wouldn’t make sense to build your dream home without a solid foundation, so why would you start your business without one? Excitement and passion for what you do made you an entrepreneur, and putting in the time to make the correct accounting decisions at the start will propel you to become a successful business owner. Here are just five accounting decisions you’ll face as you begin your new business journey:
What Business Structure Makes Sense For You?
This is a big one. Your business structure will affect how much you pay in taxes, how much paperwork is needed, how you will raise money, etc. There are four types of business entities, and there are pros and cons to each. Here is a brief run-down of the four different structures:
In this structure, the business owner is in complete control of the business and personally liable for all financial obligations.
A business partnership is when two or more people share the profits and losses of a business, each liable for the financial obligations.
A corporation is a legal entity created separately from the founders. This means the founders hold no personal liability. A corporation is treated as a person and can be taxed and held liable for financial obligations. A corporation is more costly and requires extensive record keeping.
Limited Liability Company (LLC)
This gives you the best of both worlds; it allows you to avoid any personal liability but still have the profits and losses pass through directly to the owners.
When selecting your business structure, it could benefit you to utilize professional counsel to understand each type’s benefits and downfalls. It will also be essential to stay on top of what is required to establish your business structure and make sure you meet requirements regularly, track the appropriate expenses, and document when it is right.
How Will You Manage Your Cash Flow?
A successful business needs revenue, and that revenue needs to be managed. From accurately managing your books to forecasting business operations to knowing how much to save for taxes, it’s crucial to have a system in place that keeps you on top of it all. This is one thing you won’t want to take on and just “get by.” Managing your cash flow may fall out of your scope of abilities, and that is when it’s time to bring in a professional, whether it’s an internal hire or an outsourced accounting firm.
What Will Your Business Plan Look Like?
A business plan keeps you focused. It ensures you are making strategic decisions and that you are on the road to reach your goals. Financial analysis and how your business will create revenue is a large section of your business plan. This will help you understand how your business will sustain itself and help you recruit possible investors.
How will you finance your business?
Launching a business will require capital upfront, and not all entrepreneurs have that extra money available to them. You’ll want to look into possibly finding an investor and deciding what you would offer them in return. Knowing your company’s worth will ensure you make the best decision possible when choosing investors. Financial analysis and reporting will give you real numbers to take to investors, so you know you are getting what you deserve and that you aren’t giving too much away.
Will You Hire Staff or Outsource?
Deciding who works for you is one of the most critical decisions a business owner will make. Hiring someone to handle your accounting and HR functions will free you up to spend time on the big picture, with the relief that your business is functioning correctly. You could hire staff to take this off your plate, or you could outsource to an accounting firm. By outsourcing your accounting/HR functions, you will get a wealth of experience and a team of people working for you at a cost much less than individual hires.
At Hiline, we are ready to be your foundation, and we are prepared to dig deep enough so you reach soaring heights. We want to help you navigate these accounting decisions and help you grow your business to its full potential. We pair passionate individuals with cutting-edge technology to bring you more than an accounting service, but an entire team dedicated to your success. Contact us today; we’re ready to break ground.
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