Financial Considerations For a Budding Entrepreneur

When you first started dreaming of being your own boss, your mind probably filled with visions of flexible hours and doing the work you love. But there are financial considerations to think about as well.

Start by evaluating your current personal financial situation. Are you in debt?  Do you know what you’re spending your money on each month? Do you have savings and investments?

If your personal finances aren’t in the best shape, begin making a few improvements there so that you have a stronger foundation in place.  Tracking your spending is probably the single most helpful thing you can do to start getting your finances under control.  It’s amazing what a difference seeing just how much you really spend each month (and what you spend it on) can make.

It’s not necessary to wait until you’re completely out of debt or in perfect financial shape to start a business — so long as you’re headed in the right direction and you don’t do things that make the situation worse.  (Of course, it also depends on how risk-averse you are.)

Many people think that starting a business requires having money to put into it, but it’s possible (and often wise) to bootstrap your business so that you only spend a small amount of money initially.  You can use money that you earn from the business itself if you need to make further investments later. Bootstrapping a business often means being creative — and going minimal.  Internet-based businesses are ideal for this.

You don’t need things like office space, new furniture, business cards, letterheads, fancy logos, and promotional materials when you’re just starting out. (Or sometimes ever.)  You just need an internet connection, a little bit of money for hosting and a domain name, and your time. 

While you don’t need a business card or fancy office furniture to start a business, there are a few things that you should never do without when getting started.

Remember Taxes

Number one on that list is setting aside enough money to pay taxes every time you make money from your business.  In the United States, you’ll probably need to pay federal and state income tax, self-employment tax, and possibly sales taxes and local taxes.  Be sure to talk to a tax professional or the tax authority in your area to see what you’ll need to cover.

The Essentials

You’ll also need to take care of any licenses that are required in your area, and you’ll want to consider liability insurance for your business and an umbrella policy for yourself too — especially if you have a decent amount of assets.

Keep Good Records

Finally, be sure to keep good records for your business.  Your business and personal financial lives should be completely separate. Don’t pay for groceries from the business account, and don’t buy a new computer for your business from your personal account.  Keeping things separate makes tax time easier, and is a legal requirement for many forms of business.

Jackie Beck is an entrepreneur who started her first “business” in the 2nd grade. Jackie writes about learning to love your financial life and reaching goals at MoneyCrush. Check out her site at www.moneycrush.com or subscribe in a reader.

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