Three Must Haves When Starting a Business

Starting a business is like setting out on a road trip. You have the vision of your destination, maybe a GPS, and a big bag of snacks to keep you going. But without some essentials, that journey can get rocky fast. Just like you wouldn’t start a cross-country drive without checking your car’s oil or bringing a spare tire, I don’t recommend diving into business without some foundational pieces. My three absolute must-haves to start your business journey - a solid legal structure, accurate accounting records, and a smart cash management strategy.

Proper Legal Structure

If your business were a person, its legal structure would be its outfit. So, how do you pick? Like dressing up for a big occasion, there are options to consider - sole proprietorship, partnership, LLC, corporation, and many more. Each comes with different levels of liability, tax implications, and compliance requirements.

Sole Proprietorship. Think of this as your business in its birthday suit. It’s straightforward to set up and very easy to administer, but there’s zero distinction between you and the business. Effectively, there really is no legal structure formed with this type of structure. You can still do many of the same business activities with a sole proprietorship as you would with any other structure, but the caveat is you don’t have a legal umbrella in case it starts raining.

Limited Liability Company (LLC). This one’s a bit like a nice, tailored suit. It’s flexible, and with limited liability protection, your personal assets are better protected. LLCs are popular because they offer a balance between ease and protection. They’re relatively easy to set up and administer, and for someone just starting out this is usually a great option to separate personal and business assets. Remember, having an LLC does not excuse you from having the right business insurance. Think of it this way... an LLC is designed to protect your personal assets, but business insurance is designed to protect your business assets and in the case of a lawsuit you’ll be thankful you have both.

Corporation. Here’s your business in a full-on tuxedo. It too offers limited liability protection but comes with more compliance requirements. C Corporations are your standard corporation, and in most cases, this type of entity will be used by larger firms as it does come with “double taxation.” S Corporations are more friendly to small businesses and can be vary tax advantageous to their shareholders. But as with all things tax... the details are in the fine print and it’s not one size fits all. There are many stipulations that come with being a corporation, and it’s best to consult with a professional before going the corporate route.

Whichever structure you choose, make sure to get some professional advice to ensure you’re “dressed” appropriately from the start. There are several factors to consider when selecting a legal structure, such as the number of partners or shareholders and the business’s industry. Trust us... starting out with the right legal structure for your business can save you headaches (and money) down the road.

Accurate Accounting Records

Accounting records are to your business what a travel diary is to that road trip: a complete record of everything that’s gone on. It’s tempting to just keep it all in your head (or worse, a shoebox of receipts). Your future self, your accountant, and any potential investors will thank you for keeping accurate, organized financial records.

Good accounting software is your friend here. It’ll help you track everything from income to expenses and balances of key accounts. Keep track of every dollar that flows in and out. Yes, even that $4 coffee you bought. You’d be surprised how small things add up when it comes to tax time. Accurate records make tax season easier and less stressful. Plus, they help you take advantage of deductions and credits that can save you money.

Separate your business and personal finances – this is where things can get super messy. The easiest solution is to have a dedicated business bank account and credit card that is used solely for business transactions. Keep your personal accounts for personal transactions. I cannot stress enough how helpful this will be when it comes not only to having accurate business records but also ensuring separation between personal and business assets in the case of any legal liability against your business.

If numbers make your head spin, consider hiring an accountant to help keep your finances in tip-top shape. Many accountants also provide other services such as tax filing, tax planning, and business advisory services.

Cash Management Strategy

Imagine you’re cruising down the highway, only to realize you forgot to bring enough gas money. That’s what it feels like when your business hits a cash flow crisis. Cash flow is the lifeblood of your business.

Every business has a rhythm for when cash comes in and goes out – this is referred to as a cash flow cycle. For example, maybe clients pay you 30 days after invoicing, but your vendor bills are due weekly. That gap is where trouble brews, so understanding your cycle is key to successful cash flow budgeting.

A cash reserve can help get your business through the unexpected. Emergencies are guaranteed to happen, whether it’s an unforeseen expense or a slow month. A cash reserve acts like your financial spare tire – you’re thankful it's there when you need it, and its goal is to simply get you through.

Forecast your cash flow. Think of this as your business’s weather radar. By looking at your income, expenses, and debt payments over the next few months, you’ll have a clearer idea of when things might get tight, giving you time to adjust spending, find extra funding, or push for earlier client payments if necessary. When bad weather is approaching, it’s helpful to know ahead of time to give yourself time to prepare. The same concept here – weathering the storms is just part of the game.

Ready, Set, Go!

Setting up a legal structure, keeping accounting records, and managing cash flow is not the glamorous side of business ownership, but these three essentials are your foundation to make sure you’re in the best possible shape to grow, adapt, and reach that vision you started with. And don’t forget—every great trip is better with a solid plan, a little laughter, and a good playlist along the way. Safe travels, business owner!