The Bad News.

Statistically, most new businesses fail within the first two years or less of business. Well, then, what are the tricks to success? Good professionals are one of the keys. In starting a new business the two most important professionals are your attorney and your accountant. Businesspeople who are properly advised from the first moment that they conceptualize their business have a far better chance of succeeding and, at the least, certainly avoid quite a few significant pitfalls.

The Business Plan.

The basics are static: you need a good product or service, you need to employ the best marketing techniques available, aim those techniques at an identified target and, if you’re not going it alone, you need loyal, effective personnel. Assuming, all of those things, the single most important element of conducting a successful business is choosing the best business entity in which to conduct your business. Your choice of business entity may be a sole proprietorship, corporation, partnership (general or limited), limited liability company, limited liability partnership or family limited partnership. Each of the foregoing entities have their advantages and disadvantages. Which entity you choose will depend upon the analysis undertaken by your attorney. In making a choice of entity, it may also be time for your attorney to take into account your estate plan. Regardless of what your accountant may advise, only your attorney should be undertaking the choice of business plan analysis. By the same token, only your accountant should be assisting you in setting up your bookkeeping/accounting methods. It is important to recognize the limitations of each discipline.

Partners...Shareholders...Investors...?

If you’re going into business with someone as a partner, shareholder or merely as an investor it is essential that the mutual understanding each of you have of the manner in which the business will be conducted and the sharing of the profits and losses be memorialized in a written document — a document which is drafted and negotiated by an attorney. In that process, each of you should be represented by your own attorney — even if that business associate is your spouse, lover or long-time friend — things change and your interests, from the very beginning, are different — this is true even if your alliance, at the time that you enter into your arrangement, is stable. In addition, you should execute no document before your attorney reviews that document — that means no document. While such dual representation may seem an unnecessary expense when you’re first starting out and trying to keep expenses down, attorneys’ fees at that stage of the game can save a world of heartache and very significant attorneys’ fees down the road because everyone will know the rules.

After the Choice of Entity...

Once your attorney has assisted you in choosing an entity and undertaken the creation of that entity, your accountant should be brought on board to set up the bookkeeping/accounting aspects of that business subject to the operational documents created by your attorney. Once set up, you need to decide whether to engage a full time bookkeeper, do the accounting yourself or engage a payroll company. I generally recommend that someone starting out in business not do the bookkeeping for a variety of reasons: first, you don’t need the headache of the required deposits of withholding taxes and the necessary filings; second, if you have a payroll company do the payroll, the business will have more credibility from the perspective of your bank — after all, you won’t be able to juggle the payroll to persuade your bank to extend you credit; and third, if you are in business with another person, they have no ability to “cook” the books. Keep in mind, that the cost of a payroll company can be as little as $50 per month if your payroll is three or less people and you pay it monthly rather than weekly. In the beginning, many small businesses have that type of flexibility.

What About Space....

There are many alternatives available when choosing a place to conduct your business. Unless your business is strictly a “word of mouth” business, meaning you know who each and every one of your customers or clients will be by referral alone, operating out of your home is not the best option regardless of whether you have children, dogs or other interruptions. This is so because your home is your last point of sanctuary. Once that sanctuary has been breached by an undesirable customer, there is no turning back.

Assuming that you don’t need a storefront, the creation of executive suites has opened up a remarkably versatile office alternative to the burgeoning entrepreneur. These arrangements run the spectrum of a telephone answering service patched to your home with conference room rentals available on an hourly basis to fully furnished office suites with full-time receptionist and hourly rate secretarial assistance. The cost can range from $65 per month to $750 per month or higher. Each of these arrangements s subject to a contract or lease commitment, which, once again, should be reviewed by an attorney before you execute the agreement.

And Staff...

With the significant growth of temporary personnel services, staffing arrangements can be as versatile as your office arrangements. Indeed, you can engage temporary help for as many or as little hours or days as you require. Of course, if you go through an agency, you will pay a service fee and the payment of the service fee does not necessarily result in a reliable employee. The flip side is that the fee and the arrangement can be shared with someone else you know who needs a part-time employee. Once again, if you enter into any arrangement either with a staffing company or a “share” arrangement, make sure that it’s memorialized in writing and make sure that your attorney reviews that writing prior to execution.

Of course, these are only some of the elements that need to be addressed when starting your own business. It gets more complicated, but then again, that’s the good news.