Owning a business, partnered or solely, is the culmination of both making great sacrifices, and repeatedly demonstrating the necessary entrepreneurial spirit. Unfortunately, we sometimes make decisions that don’t make very good business sense. I want to run through some business concepts that make sense no matter what business you own...

Let’s discuss the first step in starting a business. You must first ask yourself the following question: “Is this endeavor a hobby, or will it be considered a business.” I will assume that the answer is business. For most people, the answer to that question alone is the most important question you will ever answer. Once you have decided to make this venture a “business,” that next step is to sit down with your accountant or lawyer and decide what form your “business” will take.Yes, it is possible to incorporate on your own, however, it just makes good business sense to have an attorney or accountant help with the paperwork, to make sure that you have crossed all the t’s and dotted all the i’s. Let’s face it, if you can’t afford the $300 to $500 that it takes to make this happen, then you should go back and ask yourself that very important question AGAIN!

The choices range from a sole-proprietor to S Corporation, LLC or a C Corporation. Each has its own tax liability issues, which are extremely important, but to me even more important is the issue of general liability. Please look at the extra tax you might pay in exchange for the indemnification you will receive. Stop and consider the lawsuit-happy world we live in, and make your decision from there.

Once you have gotten your liability and indemnification issues decided, you have to make sure that you have the following items before you start to operate the business:

- Federal Tax ID number (usually your attorney or accountant will get this when they help you choose which structure is best for you)
- a business license
- an unemployment rate (usually you get this when you let the state know you will be doing payroll and removing taxes)
- re-sale certificate, and
- INSURANCE!!

Yes, I said it, insurance. You should be carrying at least one million dollars of general liability, applicable per occurrence, with a general aggregate of two million dollars. When at all possible you should also have an umbrella policy of one million dollars, just in case. I know what you are thinking; this guy thinks I’m made of money.

No, I don’t, and that’s exactly why I want you to be covered with the correct insurance. Along with the liability policy goes the workmen’s comp issue. I cannot emphasize enough the importance of these items. It can be a lot of money, but most, if not all, insurance companies will finance the insurance so that you can put a down payment down and then make payments on the remaining balance. I would also suggest that you shop for your insurance.