Create A Financial Cushion For Your Small Business Using These Tactics
Starting and running a small business can be an exciting and rewarding journey, but it also has its risks. Having a financial safety net in place will help ensure that your business is prepared to weather any storms or unexpected events that may arise. The Garden Grove Chamber of Commerce has prepared a guide to help you get started; let's dive in.
Start an Emergency Fund
Creating an emergency fund is one of the most important steps when setting up a financial security net for your small business. Emergency funds are meant to be used in case of unexpected events such as equipment breakdowns, costly repairs, or emergencies with staff members. Start by setting aside 3-6 months’ worth of living expenses as a starting point, then build up from there.
Secure Enough Business Insurance
Having enough insurance coverage is essential for protecting yourself and your business in case of disasters or accidents. Make sure to get adequate insurance coverage for both property damage and liability protection, since the cost of repairs or legal fees can quickly add up without proper coverage in place. Read reviews online of different insurance options, and go over your budget before committing to one.
Convert to an LLC
Converting to an LLC (limited liability company) can offer additional legal protections that sole proprietorships do not offer, such as personal liability protection if someone sues you or files a lawsuit against your business due to negligence on your part. An LLC also makes it easier to bring on new investors and partners if needed down the line. You can use an online formation service to file the paperwork, which will save you money.
Maintain Good Credit
Good credit scores can open the door to more opportunities when it comes time to apply for grants, loans, and other forms of financing from lenders outside of traditional banking institutions, such as venture capital firms or angel investors. Make sure you pay all bills on time and keep track of any late payments made so that you can rectify them before applying for financing elsewhere down the line. Look for a credit monitoring app that will help you stay on top of your score.
Apply For Grants
Grants are another great way to receive funding outside of borrowing money from banks or other lending institutions. Research different grant programs available in your industry so that you know what type of criteria needs to be met in order to qualify ahead of time. Make sure to apply early in order to increase your chances of being approved, as many grant applications have limited availability each year.
Save On Employment Tax
Consider working with independent contractors, which won't incur any employment taxes the way full-time employees do. However, it's crucial to understand the differences between employees vs. independent contractors beforehand so that everyone knows their role. Not only that, it will help you classify every individual correctly on tax forms, which could save you major fines come tax time.
Keep Your Records Organized With PDF Tools
Keeping track of receipts, invoices, and other financial documents can easily become overwhelming without proper organization methods. Fortunately, you can use PDF tools online, which allow users to access documents quickly and easily through reliable digital means. For instance, you can use this tool to convert a PDF to a JPG.
Setting up a financial safety net for your small business does not have to be complicated. With a bit of foresight, you can manage important documents using free PDF tools and save money, or set up an LLC entity that will protect you in the event of a legal issue. Every step you take will give you peace of mind about the future of your business.
The Garden Grove Chamber of Commerce has lots of resources available for small business owners. Consider joining today to take advantage of all we have to offer!
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