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The key to starting a successful business

On Behalf of | Feb 19, 2018 | Small Business Law

We’ve emphasized on this blog the importance of business planning. A strategic business plan almost doubles the chances for securing capital and business success.

According to the Small Business Administration, approximately 80 percent of new businesses will fail within the first five years. This is largely because the business owner is unsure how to market their product and services, and is also unsure how to raise finances. Many new business owners simply do not have a realistic idea as to how much money they will require.

What are investors looking for in a New York business startup?

Unless you are willing to invest a significant amount of your own finances in your venture, investors are going to be a lot less willing to help you out. Typically, investors are expecting that you put up at least one-half of the startup costs.

Also remember that relying upon others for capital comes at a cost. If you ask for a loan, you will have to pay back interest. If someone invests in your company in hopes of achieving equity, that investor will likely take over a portion of the ownership. You will need to consider what you will give up when accepting such financing.

What sort of business should you set up?

What you wish to achieve through your business should play an important role in what sort of business structure to use. A sole proprietorship is relatively easy to create, is generally less expensive to start, and provides you complete decision-making authority. It also exposes you to liability for all debts and other costs.

A partnership allows for a better ability to raise capital than a sole proprietorship and provides pass-through tax treatment (meaning that each partner only pays individual taxation and not taxes on the partnership). But in a partnership, each partner is liable for the debts of other partners will require dividing up of profits. And while a corporation provides an even greater opportunity to raise capital, it also involves increased expense and more legal compliance.

A seasoned business attorney can assist in helping you determine the correct business formation, and also assist you concerning preparation of day-to-day operations, operating agreements, shareholder agreements, and a large number of other services. Without such advice and counsel, your business stands a much greater chance of failing.

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