*Contributed by Alex Williams. Check out her Facebook and Twitter here!
Every startup business faces different challenges and obstacles on its way to success. Unfortunately, many startup owners are unaware of hidden costs and expenses that can hinder their business. These costs are hiding in plain sight, being overlooked or neglected by entrepreneurs.
Owning your own business is a great way to build a profitable career and earn a living. However, running a successful business demands attention and careful planning. Don’t let your dream or your business get ruined by unforeseen expenses. Here are a few extra costs you should be on a look out for that can prove problematic if not taken care of early on.
Beware: Start Up’s Darkest Secrets
Taxes
Never underestimate the amount of money taxes can drain from your budget. Most business owners know that certain taxes have to be paid in order for a business to run smoothly. However, even taxes you’re not aware of have to be paid, and not doing so can result in hefty fines.
Which taxes and their expenses you will have to pay, largely depends on the type of business you are running. For example, if you register your business as a limited liability company (LLC) then you will have to pay LLC tax annually. There are plenty of taxes you should be aware of like, income taxes, sales taxes, payroll taxes, employment taxes, property taxes etc. If you’re not prepared for additional tax expenses, it may draw back and slow down your business.
Licenses
Licenses and permits allow you to run your business, and most of the time business owners overlook the fact that licenses have to be renewed. There are many factors that indicate how much you will have to pay for licensing fees, such as local policies and federal regulations. Also, there’s an issue of the location of your company and how much local jurisdictions charge for a business license. All of these expenses vary from one location to another, and you must be able to afford them if you want to run your business.
Insurance
Business insurance is very important if you want to avoid unexpected inconveniences. While insurance is somewhat expensive, it will save you money in potentially disastrous situations such as a fire, flood or a lawsuit. What kind of insurance policies you might need depends on the business you run. For instance, if your business offers some kind of service to customers you might require a surety bond. Which of the insurance bond titles you will have to acquire, depends on the services your business offers. There are also employee liability and public liability insurance policies, as well as insurance for damages and injuries, negligence, property, inventory, etc. Again, which insurance types are needed depends on the business and they all carry a price. Make sure you have additional funds ready for insurance – after all, it’s better safe than sorry.
Legal Fees
Small businesses are often a target of various lawsuits. While some lawsuits are legitimate, a large percentage of them are completely without merit. This is mostly due to the tendency of small businesses tend to settle out of court rather than pursue action to the full extent of the law. Nonetheless, business owners must defend themselves and pay for all the legal expenses. To make matters worse, the costs of legal disputes go beyond settlements and legal fees. All the time you spend and devote to lawsuits in court is time and devotion you could have spent on your business. Every loss of work can produce more expenses that you might not be able to afford and insurance premium cost will raise after you have been victimized by a phony lawsuit.
Employee Turnover
Employees leaving can cost your business more than you expect. After all, a steady workforce is crucial for profits. Every employee you lose will cost you more and more to find another one, train them, educate them and get them ready for work. This takes time and money. Another thing is the fact that employees who leave voluntarily are not entitled to benefits. However, if you don’t dispute their claims you will have to suffer additional expenses and your unemployment insurance costs will increase. Your business will slow down until you find the replacement workers. Also, you will have to spend money to train new workers and all of that takes time- and we all know time is money.
In retrospect, there are plenty of taxes, fees, permits and licenses that can drain your budget in an instant. You should do your research and prepare for any additional expenses that may come your way. Also, hiring or outsourcing professional assistance such as accountant and attorney to help you filter through all the bureaucracy and red tape is a good practice.
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