Have you been thinking about starting your own accounting business or already taking steps toward launching your own firm? If so, you may feel both exhilarated and overwhelmed. Becoming a business owner brings excitement and challenges as you create your own professional destiny.
At CorpNet, I have worked with many entrepreneurs as they navigate the process of starting their companies. Here are some of the common pitfalls I’ve seen create issues for them. I share these in hopes that the awareness will help you steer clear of the headaches and hassles they cause.
Five Common Startup Mistakes to Avoid
Not putting enough thought into your business entity type. The business structure you choose will have a legal and financial impact on your company.
Some business entity types offer more personal liability protection for owners than others. For example, a sole proprietorship is not a separate legal entity from its owner, so if the business is sued or can’t keep up with its financial obligations, the owner’s personal assets could be at risk of being taken as restitution. However in some states, with a Limited Liability Company (LLC) or corporation, company assets and liabilities are separate from those of the owner. Therefore, those structures can offer some legal protection for business owners. Consult with a legal professional to see what personal liability protection your state offers.
As you know, income tax treatment isn't the same for all business entity types (e.g., business tax obligations flow through to the owners of sole props, partnerships, LLCs, and S Corporations, while C Corporations pay taxes separately at a corporate rate). The degree of administrative complexity also varies from one entity type to the next, as well as by state. For example, although a corporation provides the most personal liability protection and possible tax advantages (given the change in corporate tax rates this year), they cost more upfront to establish them, require bylaws and board of directors, and have more ongoing reporting requirements.
Seeking the guidance of an attorney can help sort through which business entity type will make the best choice for your company.
Not putting your best foot forward in your marketing endeavors. Too many new business owners adopt a "build it, and they will come" mindset. No matter how stellar your services are, you need to find ways to raise awareness of them. As a professional in the financial industry, trust plays a significant role in attracting clients. Find opportunities to build relationships within your community through local organizations like chambers of commerce, Rotary clubs, and others. As an expert in your field, you might consider volunteering to offer presentations on tax tips and other finance subjects that will demonstrate your expertise.
Also, don't underestimate the word-of-mouth power of the Internet. Having a mobile-friendly website that follows best local SEO practices and using social media can help your business be found by prospective clients who are looking for accounting services in your area. Consider seeking a reputable website developer/designer or marketing firm that can assist you in establishing a strong online presence.
Having lack of funds to get you through the slow times. Starting a business comes with uncertainties—often of the financial kind. As it may take some time to build up a base of clients, you can help minimize stressing over money by having backup funds to carry you through the possible “famine” moments in “feast or famine” cycles. Accounting businesses have seasonal ups and downs, so consider them carefully as you plan your reserve cash needs. How much money you need to carry you through will depend on a number of factors, including your ongoing operating expenses. Fortunately, as an accounting professional, you have more knowledge about finances than the average business owner, so use that to your advantage as you plan your budget.
Not submitting the required compliance paperwork accurately and on time. From filing business registration paperwork with the state to obtaining the professional licenses you need to operate your accounting firm legally to submitting other documentation, if you file your paperwork incompletely, inaccurately, or late, it could cost you. When business owners aren’t aware of what’s required and when it needs to be submitted, it can delay the launch of their companies and cost them additional fees.
Consider enlisting the help of an attorney and research what federal, state, and local responsibilities you must fulfill to start and continue operating your business. Some examples of possible ongoing compliance documentation include annual reports to the state, renewals of licenses and permits, and Articles of Amendment (if you moved your office or had some other significant change to the business).
One way to keep all of your documentation in order is to get assistance from an online business document filing company that will notify you of upcoming deadlines and help prepare and submit your filings.
Not aligning with partners who can help them expand their services without adding overhead costs. Entrepreneurs sometimes miss out on increasing their revenue and profitability because they fail to leverage partnership opportunities. For example, some online business document filing services offer partnership programs that offer a way for accounting firms to deliver more value to their clients while getting additional income for their businesses. Keep your eyes open for arrangements like these and explore how they might help your business succeed.
Get Started on the Right Foot
Careful planning and insight from trusted advisors will help minimize oversights and mishaps during the startup process. While it’s impossible to avoid every bump in the road, the more you prepare, the better you will navigate the course of becoming a business owner
Author Bio: Nellie Akalp is a passionate entrepreneur, small business advocate and mother of four. She is the CEO of CorpNet.com and recently launched a partner program for the accounting community. Accountants, CPAs, Bookkeepers and other professionals can offer business incorporation and compliance services to their client to extend their services but CorpNet does the work. More info at: CorpNet.com/partners