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Whether you are looking for a way to achieve financial freedom, or you have been freelancing for some time, there comes a point for many people when they consider setting up their own business. It is unlikely to be plain sailing right through the life of a new business, and you may have to endure some sleepless nights as well as a few challenges. However, the potential upside outweighs these challenges for a lot of people, and setting up your own business removes any earnings ceiling that might currently exist.
Here are 6 things you need before you consider opening your own business.
It is possible to essentially run a business as a freelancer or sole trader. However, this means that your own finances and those of the business are interlinked. If the business runs into trouble and can’t pay its bills, or if it gets sued by a customer or supplier, you will be liable to meet any shortfall that the business can’t.
An LLC is the most commonly used structure because it legally separates you from your business, in most cases, and because it purports to offer a simple incorporation process. However, there are limitations, and regulations vary according to business, industry, and even location. For example, some LLCs provide anonymity, but not in all states.
A business plan is a roadmap of how you will progress with your business. Do you intend to take on employees, expand the size of your business, or look for funding in order to expand the range of products or services you offer? Your business plan will help guide you towards these goals. It will also be useful when you apply for grants or look for outside funding and investment.
Whether you have saved enough money to start a business yourself, or you know that you will need additional funding before you can open the doors, you need to have a clear understanding of your funding options. Venture capitalists and outside investors may be willing to invest in a hot idea, but if you have no experience taking a business from idea to profit, it can be more challenging to find external investment. Do your research early to avoid disappointment later.
Whatever the source of your funding, you will need to manage money properly and carefully. In most cases, this means getting a business bank account (open a business banking account for free here). You may need to present your business plan, especially if you want features like a business credit card or an overdraft facility. If you do not need any of these account features, it should be easier to open an account.
It is highly unlikely that you will have the funding to buy premises straight away, and it isn’t always a good idea for a new business to do so. No matter how accurate your business plan turns out to be, there is a good chance that you will expand sooner or later than expected, or you may not plan to do so at all, but most businesses find that they need more space eventually. Lease business property in an area that is local to your customers, if you need to meet them in person, and ensure that there is a good local source of employees.
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