Small business is clearly defined as a business, sole proprietorship, partnership, or corporation that has fewer registered employees and/or less yearly revenue than an established corporation or private firm. The definition of “personal” in regards to being eligible for government assistance changes annually, so it’s important to stay abreast of the current regulations and procedures. Also, different types of businesses will require different licensing and certification fees and these fees can vary greatly from state to state.
Generally, small businesses are focusing on producing and marketing products or services, providing some form of personal service, and have fewer fixed offices. More traditional businesses employ hundreds or thousands of people and carry out most or all of their business activity through a fixed workplace. In fact, many small businesses are often operated from home or one location. The physical location of a company usually has little impact on its annual revenue or business growth; however, new companies are required to register with the state before conducting business even if they do not plan to spend or sell any assets.
Some types of small businesses are technically “sole proprietorships,” which means they own everything the business owns, but they are not connected to any other companies. Examples include sole-proprietorship partnerships, DBA (DIBC) corporations, partnerships, LLCs (limited liability companies), and S-corporations. Some small business paperwork can be confusing, but there are plenty of online guides available to help. Most small businesses are considered start-up businesses; therefore, filing taxes, registering for permits and licenses, and obtaining business permits are the same as those of larger businesses.
It’s best to start a small business as an entrepreneur rather than as an employee. Many small businesses fail because owners did not feel like they were in control or didn’t have the drive to be self-employed. Owning your own business gives you more control and freedom, although the startup costs can be higher because there’s no employees to pay, employee benefits, office space, and so on. But it’s possible to run small businesses without owning lots of assets.
In addition to being self-employed, some small businesses often form corporations or LLCs. An LLC is a separate entity from its owners, making it easier to document. Also, many small businesses are run from home, so an office is not needed. However, the fees for incorporating are much higher than for running an office. Most small businesses also prefer to hire a consultant or an attorney to handle paperwork instead of doing it themselves. An independent business consultant can also serve as legal counsel to help them set up an LLC, help them set up an effective corporate structure, and guide them through the tax process.
Business deductions are another reason to incorporate. A small business owner may be able to reduce their income tax due to a greater tax burden imposed by state and local governments, since they will pay taxes only once. As a small business owner, you may also get a refund each year instead of paying the higher tax rates that many other people would pay. And the lower corporate tax rates mean that your annual revenue may be higher.
If you want to be as sustainable as possible, be careful not to let expenses go over the line. It’s easy to say you’re going to do your best to save money, but some of those savings aren’t really going to make a difference in your bottom line. In fact, many small businesses are forced to cut costs every year because they haven’t been able to keep pace with the escalating cost of doing business. A smart business owner plans his business carefully and accordingly. He figures out where he can cut costs, what services he can eliminate, and what types of sales and marketing techniques he can put to use to increase revenues and profits.
The financial climate isn’t good for small business owners. It’s making it tougher than ever before for the business owner to survive. But if you play your cards right, you might be able to keep your small business afloat even during the tough times. It just takes solid money management and sound business decisions.