Financial Checklist for Starting a Business
Starting a business can be an immense undertaking. There are certain steps to take in order to avoid making any unnecessary mistakes. When preparing for the launch of a start-up business it is best to break down the process into manageable chunks. Creating a to-do list can be advantageous in minimizing oversights, remaining on track, and completing essential tasks efficiently. Accurately planning the financial component of a start-up is fundamental to its success. The following are examples of items that are frequently included in a financial checklist that can be helpful to consider when starting a business:
- Estimate start-up costs and burn rate: the majority of businesses will pay out a significant amount of money in start-up fees before the business is capable of earning any money. Depending on the type of business this can include, inventory, machinery, formation legal fees, equipment, overhead (salaries), internet presence…etc. Understanding the burn rate can also help pinpoint areas where money can be saved (i.e. buying in bulk, reducing inventory, outsourcing tasks…etc.).
- Make sure to fully understand the financial implications and responsibilities before launching a business.
- Understand the legalities: certain businesses are required to register for various licenses to legally operate. Most licenses are issued at a state or local level. The U.S. Small Business Administration (SBA) offers helpful resources on business licenses and permit requirements. Figure out if a license and/ or permit is needed, and if so how to properly register for it. This will help to avoid costly penalties.
- File for trademarks, copyrights, and/ or patents: depending on the nature of the business, acquiring the relevant trademarks, copyrights, and/ or patents can help establish legitimacy and also help to protect the intellectual property of the business.
- Open a business bank account: separating personal accounts from business accounts is essential in maintaining proper records. It is also helpful should a business ever get audited by the IRS. Also, consider opening a business credit card to help facilitate purchasing, recurring fees, etc.
- Obtain an Employer Identification Number (EIN): the EIN is a unique nine-digit number that is issued by the IRS to business entities operating in the United States. In order to legally identify as a business and file taxes properly, the business entity must apply for and file under its EIN. Additionally, a business bank account cannot be opened without a valid EIN.
- Get insured: in order to be protected, a new business should find out what type of short and long-term insurance provides the most expansive coverage, and purchase it. Do not procrastinate purchasing insurance.
- Keep copious records: detailed records of all expenditures, income, correspondences, and all things related to the business is essential in keeping the cash cycle flowing as expected and smoothly.
The specific financial needs of each business will vary. Regardless of your preparedness, there will be certain aspects of a business that will surface after it has launched. It is, however, helpful to understand the intricacies of one’s business and prepare for potential challenges prior to its launch. While the above checklist can help to give an idea of what should be financially considered when starting a business, obtaining personalized financial guidance from an accountant that will ask the tough questions, improves the odds a new business will meet their short and long-term goals.
For Further Information
Krowne Certified Public Accountants offer unparalleled financial guidance and professional services specifically tailored to our client’s needs. Please feel free to reach out to us at Krowne Certified Public Accountants by filling out the form on our contact us page or via phone at 818-831-6075. We would love to discuss your situation and help you grow. We look forward to hearing from you.