Small business owners encounter challenges daily – problems that can be solved efficiently and effectively by company management. However, some problems can be so costly that the business may be forced to slow down growth, or even close up shop.
Avoiding business problems is much less costly than fixing them. It’s important that your business is nimble enough, and farsighted enough, to see a problem ahead and sidestep that problem through planning and preparation.
So how do you avoid business problems? Some challenges simply can’t be avoided. However, by taking some simple steps, you can help avoid some common problems before they occur.
1. Establish the right legal structure for your business. There are numerous configurations for your business entity, including sole proprietorships, partnerships, and corporations, each with different benefits and potential drawbacks. Some corporate entities protect owners’ personal assets by separating business from personal assets. Be sure to consult an attorney to make sure you have the right legal structure in place before opening your doors.
Having the right structure at the beginning of your business may protect you in case legal problems, such as an expensive lawsuit, crop up later.
2. Keep your corporate entity filings up to date. Many states require quarterly and annual filings of business earnings, expenses, profit and loss, salaries paid, and taxes due. Some states require the filing of annual reports for certain types of entities. These annual reports may describe company activity, profit and loss, and other information.
In Nevada, businesses file annual reports with the Secretary of State’s office. The state has simplified filing with a useful website that enables you to file your annual reports – and other business documentation – online. Visit https://nvsos.gov/ to file your annual paperwork with Nevada’s various oversight and administrative agencies.
3. Secure all necessary permits, licenses and accreditations. Your business may require zoning permits at the city or county level. Nevada also requires certain professionals, and types of businesses, to be licensed to conduct business in the state.
The federal government has agency oversight for businesses that handle and/or store dangerous materials, hire and maintain staff, pay salaries, hire consultants, and conduct a wide variety of business activity.
Your business isn’t compliant if it doesn’t have all its paperwork in order. Not sure what you need? Contact a business attorney or Certified Public Accountant for advice on what paperwork your business must file and keep on hand to stay compliant with the rules and regulations.
This one step can help avoid a lot of problems for small and large businesses alike, so check your licenses and permits to determine that they’re up-to-date and that your business is in compliance.
4. Pay your taxes. Depending on the nature of your business, you may be required to pay taxes on salaries, sales taxes, taxes on equipment and company assets, capital gains, property taxes, and other taxes at the local, state and federal level.
You can lessen your chances of getting in trouble with taxing authorities by providing them with clear, accurate documentation of all taxable business activity. If taxes are due quarterly (FUTA, FICA, etc.), schedule them on your calendar and stay current. Falling behind on tax payments is an avoidable problem if you plan ahead and know your company’s tax liabilities.
5. Insure everything. Even a one-person business has assets – computers, furniture, inventory stored in the spare room – and large companies may have hundreds of thousands, even millions of dollars of assets. Purchase a general business policy to cover the basics, but also ask your insurer to conduct a risk assessment of your business to identify exposure to risk that could cause problems. Fix these potential problems before they manifest themselves as real problems.
Also, consider purchasing an umbrella policy. An umbrella policy is relatively inexpensive because its coverage only kicks in when all other insurance policy limits are reached. Think of it as low-cost protection that can turn problems into inconveniences, while protecting your business and your company assets.
6. Provide business terms in writing. A handshake may be good enough for you, but it won’t stand up in court should problems arise. One way to help avoid problems is to document everything you do.
- Contracts should be detailed, clear, reviewed by legal counsel, and customized to help protect all stakeholders.
- Payment milestones should be laid out clearly, and collections should be made promptly to maintain company cash flow and avoid “financing” a client’s project.
- Prepare a statement of work (SOW) for every project before contracts are signed. All parties should approve the SOW before business gets to the contract stage.
- Terms and conditions should be provided to customers and clients. If you warranty your company products or services, the warranty should be reviewed by legal counsel, and provided to each customer or client.
- If it’s part of doing business, get it in writing – every time. Even long-time clients can encounter problems that may have a ripple effect on your business. Having a contract with payout dates can help avoid potential problems.
Avoiding business problems can help you save money, reduce stress, and keep your business growing. Take some time to review all documentation required by government agencies. Look over your insurance policies, employee manuals, order and invoice forms, and other paperwork associated with your business.
You, and your well-prepared business, can then focus on business growth.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A. Member FDIC