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24 - 26 : The Complete 35-Step Guide For Entrepreneurs Starting A Business

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24. Set Up Appropriate Books and Records for Your Business

You will need to keep multiple books and records for your business, including:

  • Financial statements (P&L, balance sheet, cash flow)
  • Employee records
  • Board and stockholder minutes and consents
  • Stock and options ledger
  • Tax filings and records (federal, state & local income, sales and property taxes)
  • Secretary of State filings (Certificate of Incorporation, annual filings, etc.)
  • Invoices & contracts
  • Bank accounts
  • Creditor records

25. Properly Insure Your Startup

If you are going to go through the time and effort to start a business, you need to protect it by purchasing appropriate insurance coverage.

Your first order of business should be to determine your specific insurance needs based on the nature of your business. Ask yourself what risks must be covered and how much coverage will be sufficient. Then find and evaluate insurance providers or insurance brokers to determine which companies handle the types of coverage that suits your needs.

While shopping for insurance, you will want answers to these types of key questions:

  • What are the deductibles?
  • Are the coverage limits high enough?
  • What items or occurrences are excluded from coverage?
  • Are there any gaps in the coverage?

Here is a list of the types of insurance that may be appropriate for your business:

  • General liability insurance
  • Product liability insurance
  • Professional liability insurance
  • Property insurance
  • Worker’s compensation insurance
  • D&O (directors & officers) insurance
  • Health insurance for employees
  • Business interruption insurance
  • Commercial auto insurance
  • Data breach/cybersecurity insurance
  • Key man life insurance

26. Determine How to Divide Equity Among the Startup’s Co-Founders

There is no one right answer to the question of how equity should be divided among a company’s co-founders. But everyone involved should discuss this issue and come to an agreement up front to avoid misunderstandings later on. If you are the original founder and brains behind the idea, a good argument can be made for more than 50% ownership. The split should take into account the following:

  • The relative value of the contributions of the co-founders
  • Vesting dependent upon continued participation in the business (you don’t want to give away 25% of the company to someone who leaves after a few months)
  • The amount of time to be committed to the business
  • The cash compensation to be paid as an employee
  • Whether the co-founders will be contributing cash as an investment in the business
  • Whether one person wants to maintain control over decision-making

forbes.com

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