Here are six questions you should ask and answer before earning your first dollar:
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1. Do I really need an office? The answer depends on the nature of your business. You'll need space if you require a storefront or on-site personnel, but if you're like the majority of virtual businesses today, consider setting up a home office or renting shared office space instead. Starting a business can be extremely expensive, so reducing costs is the best option to improve your bottom line when revenue is small. Look into shared office services like Loosecubes, and check out online collaboration tools like Dropbox or Addie to share files and ideas with colleagues and clients.
2. Can I afford personal healthcare? Expensive healthcare is probably the top reason that many aspiring entrepreneurs refuse to break away from the comfort of their current corporate benefits. However, services like eHealth help you research plans and options that fit your personal needs and budget. Don't let personal healthcare costs prevent you from starting your own business, and don't take unnecessary risks by going without coverage.
3. What is considered a business expense? One major benefit of owning your own business is the ability to write off certain expenses on your taxes. Always seek the advice of a licensed tax professional if you have questions while preparing your returns. A few commonly forgotten business expense deductions include mileage; rent, mortgage, and utilities related to your home office; telecommunications, business meeting meals, and tax preparation fees.
4. How can I save for retirement? Small business owners can contribute to an individual 401(k). Essentially, you use your small business to "match" your personal contributions—a great way to use both company money and earned salary to fund your retirement. There is a maximum total contribution of $50,000 for 2012, which should be plenty for most small business owners.
5. How should I structure my company? There are several different business structures available, each with their own legal and financial implications, so do your homework to choose the right structure. Limited liability companies (LLCs) are becoming increasingly popular for small businesses due to low filing fees, ease of incorporation, relaxed tax implications, and liability protection for owners. If you need to incorporate to share ownership or shares but want to report profit and loss on your personal tax return, then an S corporation may be right for your business. If you choose to incorporate as opposed to setting up a sole proprietorship or LLC, you will need to elect a board, sign a shareholder agreement, and facilitate annual meetings to comply with government regulations.
6. Is there an industry association for my business? Very few companies create an entire industry on their own, which means there should be an industry or trade association available to you right now. Join one to connect with peers, ask questions, share best practices, and stay informed on news and events that may impact your business. Many companies within the same industry join a group together for great mutual benefits, such as cutting shared costs with suppliers, vendors and service providers, and pooling resources to attract larger partners, investors, or advertisers.
Taking an idea and turning it into a successful business can be the most rewarding life event for any entrepreneur. But to increase your chances of success, you may want to answer these crucial questions first.
Steven Staley is the owner and founder of SoCo Sports, a sport and social club located in Sarasota, Fla. He is also the creator, founder, and owner of Playbook Community, a free mobile application that connects athletes and sports organizers across the globe. Steven is also a member of The Young Entrepreneur Council (YEC), an invite-only nonprofit organization comprised of the country's most promising young entrepreneurs. The YEC promotes entrepreneurship as a solution to youth unemployment and underemployment and provides its members with access to tools, mentorship, and resources that support each stage of a business's development and growth.