Setting up Your Small Business — Credit Considerations

Setting up Your Small Business — Credit Considerations It’s fairly easy, relatively speaking, to set up the financial aspects of a small business startup if you are the sole proprietor, or if it is a family business, (small family.)  It can become much more tricky, if there are two or more owners who want to chip in together.  The first advice that comes to my mind, is for all everyone to march into an attorney’s office and put something down in writing and everybody get out the checkbook and write a check for the same amount to throw in  for the start up costs.  As the business gets going, it can become real tricky, especially if some of the partners work in a different location.  One of the usual scenarios I’ve seen, is one of the partners consistently has to go to the warehouse, workspace, job location, what ever you wanna call it, and something comes up and he has to pull his billfold out and pay for the resolution of the problem out of his own pocket. Now, the most consistent thinking on this is, turning the receipt in at the end of the day, or the week, and getting reimbursed. Sometimes in the real world this is easier said than done. In a business downturn environment such as we have today, this can get very dangerous.  Certain owners can end up pushing their personal credit to the limit, and, when this happens there can be a compromise of the personal financial security. Laws vary from state to state, but if the prospective owners have a well written agreement drawn up, and of course all the owners  talk to each other, problems can be minimized. I know if you’re setting up a small business with a business partner, this can seem a little scary, but one has to realize that anything can happen in the business world, and everyone must be, “on the same page,” everyone must have the same agenda. I was involved in the business years ago where one of the business partners, who had been a great job for the preceding years, suggested we branch out into a owning apartment complexes. She had the perfect one in mind, it was in a small town, in another state, about 3000 miles away.  She also happened to be our payroll manager, in other words, she had the checkbook.  Well, we trusted her, and later found out, that her brother was the manager and had received thousands of dollars from our bank accounts and had done nothing as far as his job description.  Looking back, it’s easy to see how financial burdens in a family can invalidate solid business practice. Done the correct way , business finances are handled through the business and personal finances are separate.  Setting up a small business in the right way, and making sure the personal and business accounts are handled separately, a business owner has more power to protect his private assets in case something goes wrong with the financial status of the company. 

Setting up Your Small Business — Credit Considerations

It’s fairly easy, relatively speaking, to set up the financial aspects of a small business startup if you are the sole proprietor, or if it is a family business, (small family.)  It can become much more tricky, if there are two or more owners who want to chip in together.  The first advice that comes to my mind, is for all everyone to march into an attorney’s office and put something down in writing and everybody get out the checkbook and write a check for the same amount to throw in  for the start up costs.

 As the business gets going, it can become real tricky, especially if some of the partners work in a different location.  One of the usual scenarios I’ve seen, is one of the partners consistently has to go to the warehouse, workspace, job location, what ever you wanna call it, and something comes up and he has to pull his billfold out and pay for the resolution of the problem out of his own pocket. Now, the most consistent thinking on this is, turning the receipt in at the end of the day, or the week, and getting reimbursed. Sometimes in the real world this is easier said than done.

In a business downturn environment such as we have today, this can get very dangerous.  Certain owners can end up pushing their personal credit to the limit, and, when this happens there can be a compromise of the personal financial security. Laws vary from state to state, but if the prospective owners have a well written agreement drawn up, and of course all the owners  talk to each other, problems can be minimized. I know if you’re setting up a small business with a business partner, this can seem a little scary, but one has to realize that anything can happen in the business world, and everyone must be, “on the same page,” everyone must have the same agenda. I was involved in the business years ago where one of the business partners, who had been a great job for the preceding years, suggested we branch out into a owning apartment complexes. She had the perfect one in mind, it was in a small town, in another state, about 3000 miles away.  She also happened to be our payroll manager, in other words, she had the checkbook.  Well, we trusted her, and later found out, that her brother was the manager and had received thousands of dollars from our bank accounts and had done nothing as far as his job description.  Looking back, it’s easy to see how financial burdens in a family can invalidate solid business practice.

Done the correct way , business finances are handled through the business and personal finances are separate.  Setting up a small business in the right way, and making sure the personal and business accounts are handled separately, a business owner has more power to protect his private assets in case something goes wrong with the financial status of the company.