Starting up a small business, such as residential roofers, may seem as easy as just getting to work. However, many legal and financial concepts must be taken into account before you get started. Failure to take these elements into account will impact your financial health in many ways.
Thankfully, learning more about your small business legal structure isn’t as complex as you may fear. This article will give you a good insight into the various concepts that dictate your legal and financial issues. While it doesn’t cover everything, it should give you a pretty comprehensive understanding.
Permits and Licenses are Critical
Before spending too much time on your small business legal structure, you need to make sure that you have the permits and licenses required to operate your company. These licenses are designed to be easy to obtain as long as you follow the proper legal guidelines and do all necessary testing.
For example, you typically need to apply for a small business license to start operating, paying taxes, and establishing yourself legally as a business. These steps are relatively simple, thankfully, but must be handled with the proper legal approach. If uncertain, talk to a business attorney to get more help.
Beyond these factors, you also need to think of elements like CFO for small business firms and other factors to keep your company safe. Many such services and products have licenses or require you to go through various tests to ensure that you can handle them correctly and with minimal challenge.
Ensure that you pay attention to company parking and get the proper permits and licenses to open up lots where you need them. Taking this step will ensure that your employees have the place they need to park and cuts back on any legal or financial troubles that may come your way unexpectedly.
Legal Structure is Also Vital
At this point, it is essential to establish your small business legal structure before you begin operating. The legal structure of a business is often a tricky concept for some to understand and should be explained before you go too much further in establishing this concept.
The legal structure determines your taxes and dictates how much you spend and what forms you use. The types of legal systems that you can operate will vary according to your business needs and include simple concepts like:
- Sole Proprietorship – In this business structure, you are the sole owner of a business and are responsible for all of its legal needs, including paying its taxes.
- LLC – This structure is a more expanded private business, including a handful of different people working in a company but not immensely expanded to a corporate level.
- Corporation – Corporations are large businesses with many employees, most of which are usually “public” or broken up into stock ownership to make them more diverse.
- Partnerships – This business structure allows multiple firms to join together in operation, usually under a combined name, to pool their financial and business resources.
Whatever business you decide to operate, it is crucial to make sure you have the correct tax forms. As a small business, you’re likely to be either a sole proprietorship or an LLC. Ensure that you talk to your tax expert about this structure before attempting to do your taxes or make business decisions.
Employment Laws Dictate Employee Treatment
If you are the only person working at your small business, you need not worry about this issue. However, suppose you have even a few employees. In that case, your small business legal structure needs to consider employment laws and the various ways that you can handle and treat your employees properly.
For instance, you need to know what kind of compensation is necessary to take your employees out to a country club or any other entertainment center for relaxation and fun. Other elements that you need to consider when hiring people for your business include:
- Hiring and Firing Rules – Are you going to be an at-will organization? This type of company can hire and fire people for whatever reason they want. State rules usually dictate this concept.
- Compensation Packages – What kind of laws are in place for compensation packages in your state? You need to make sure you provide minimum compensation to meet these requirements.
- Injury Compensation – Every month, you need to pay workers’ compensation taxes for each of your employees. Any compensation paid to these employees will come from this fun.
- Taxes and Payroll – Understanding the various rules and laws dictating payroll and taxes is critical if you plan to hire people to work in your business.
You’ll also need to understand concepts like scheduling limitations, minimum wage, employee complaint rights, and whistleblower protection. All of these concepts can impact even small businesses, so make sure that you’re ready to handle these demands before hiring anybody new.
Insurance is Important Legally and Financially
When opening up a small business, you can’t just start working and assume that everything will be okay. Instead, you need to set up insurance to protect yourself and your company. Without these policies, you should quickly end up experiencing legal and financial difficulties.
For example, you need to balance insurance policies – such as liability – with your needs and financial capabilities. In this situation, you’ll need to decide how much protection you need for your company and reach an insurance company to help you manage this situation.
And you may also want to find insurance expert witnesses if you run into any complications with your company operation. These professionals are carefully trained to testify on your behalf and will do whatever it takes to protect your small business legal structure and make it stronger.
Will you need insurance on your vehicles for a small business? If you are using them solely for business needs, you can cover them with business-related auto insurance. This step is an excellent choice if you have a delivery company or a building firm that uses vehicles regularly.
Balance Your Cash Flow Situation
When expanding your small business legal structure to maximize your success, it is crucial to balance your cash flow in a way that makes sense for your business. Unfortunately, too many small businesses don’t pay attention to this facet and end up struggling to stay open long enough to succeed.
This financial concern is also related to your legal issues because you need to consider elements like business data services and much more. Just a few aspects that you need to take into account when balancing your cash flow include the following:
- Minimize Unavoidable Expenses – You just have to meet some expenses, like payroll, so make sure that you have enough money to pay your employees every week.
- Calculate Your Income – Consider how much money you are expected to make based on how you make and always operate at a level below this amount.
- Expand Your Operation – Always work to expand your business to more customers and better services to ensure that your cash flow remains consistent and persistent.
- Cut Down on Inefficiencies – Try to eliminate unnecessary workers, decrease inefficient operation, and take steps to boost your overall efficiency as a business to avoid complications.
The key to success here is almost comically simple: make sure that you make more money than you spend. However, achieving this goal is not as simple as it might appear on paper and often requires a careful approach that may be challenging for some people to execute with ease properly.
Minimize Fixed Expense Scenarios
A successful small business legal structure minimizes unnecessary fixed expenses and steadily expands income. Fixed costs are those that must be covered regularly and which can either not be eliminated or which can only be controlled so much once they occur.
Thankfully, it is possible to avoid these issues by taking what we call the “ABCD” of fixed expenses. These simple steps are available for small and large businesses and should help make your business more successful. They include these simple concepts:
- Avoid Excessive Loans – Though you may need a personal loan to get your small business started, try to avoid taking out too many. Excessive personal or private loans may make it hard for you to meet your payment needs and could cut back on your ability to grow.
- Balance Your Employees – Try to hire as many people as you need to handle your business needs but don’t bring on so many people that your payroll is expansive and hard to manage.
- Cut Down on Office Size – Do you need a sprawling office in the early stages of your small business? Probably not, so choose an office size that makes sense for your needs as an owner.
- Decrease Your Unnecessary Spending – While it is fun to go out to eat every day and put it on your business credit card, you’re only adding extra expenses to your operation in this way.
These simple steps will help cut back on unnecessary spending that can cost you so much money with your business. Try to make sure that you have a limited set of fixed expenses and an adaptable array of fixed income options to get the best chance of avoiding financial troubles.
Plan for Financial Emergencies
Another critical step to take when creating your small business legal structure is to set aside an emergency fund for your business operation. You never know when something unexpected will occur, and you need to be adaptable to these scenarios to ensure you don’t get in a dangerous situation.
As a result, you should have an emergency savings account to put a little money in every month. These funds should never be accessed unless you have an emergency that needs to be handled. Emergencies that may require this type of funding include:
- Damage to your facility and operational equipment
- Sudden loss of income or decrease in sales
- A higher than expected tax bill
- Emergency medical issues that affect your or your employees
Many people will place some of these funds or investments in personal and commercial storage centers to keep them safe. This step may be a good one if you don’t have any other storage options, as their fees are usually relatively small and reasonable and should be easy for most people to handle with ease.
Time is Money, So Spend It Wisely
Your small business legal structure requires you to plan every element of your success, including weekly, monthly, quarterly, and yearly plans. However, it is crucial not to get bogged down in excessive planning. Remember: time is money, and you can’t afford to waste much as a small business.
So don’t spend too much time messing around with the little details if your business is not making money. Instead, it would help if you started getting new customers ASAP. While you should always spend some time planning, action is often needed to expand your business. These steps include:
- Marketing directly to customers
- Expanding operational hours
- Direct contact with potential buyers
- Producing new and better products
That said, it isn’t wise to just go off the handle and never plan anything. Too many companies try to take this approach and end up suffering. Instead, you need to balance your planning and execution and make sure that you take into account your current business success and many other factors.
Just as importantly, make sure that you pay yourself every week to ensure that you are rewarded for your hard work. Yes, even small business owners should have a wage for their company, as this ensures that your needs are taken into account and that you aren’t struggling in any way.
Preparing Your Business Needs
By now, you should have a pretty good idea of how to set up your small business legal structure in a way that makes sense for your needs. That said, there may still be some confusion about some of these aspects, a confusion that may be beyond this article’s short length to address adequately.
If you still aren’t sure about handling this process, reach out to a professional business adviser to learn more about your options here. These experts will examine your small business needs and provide the help needed to ensure that you are satisfied with your company and its operation.