A Start Guide for Aspiring Entrepreneurs

Protect your business—and yourself—from the outset

There is an old adage by Confucius that says, “Choose a job you love, and you will never work a day in your life.” 

Arguably one of the most brilliant Eastern philosophers of all time, he lived during simpler times. In the modern market, love is not enough to create a successful enterprise. Passion alone will not keep the doors to a business open or help build the foundation necessary to succeed. More importantly, in this economy, love of one’s work does not keep the lights on, put food on the table, and all the other necessary activities required to perpetuate a business. 

Starting a business is not for the faint of heart. According to the U.S. Bureau of Labor Statistics, nearly one quarter (23.2 percent) of businesses will fail within the first year. By year 10, 65.3 percent of businesses shutter their doors and close shop. That leaves roughly 3 in 10 businesses that will endure. Many budding entrepreneurs would say they are married to their business, but like any good relationship, sometimes love, sweat, and tears are not enough. 

Speaking to countless businesses, big and small, will reveal one indelible factor: Commitment, resilience, and constant planning are also requirements for building a successful business. Also, one cannot forget about the luck factor. 

The best planning and optimal launch of a well-constructed business model can be derailed by a natural disaster, pandemic, or other unforeseeable events. Unpredictable changes to legislation can render a person’s business idea untenable or even illegal, which is why the first step to any venture should be incorporation. 

Starting a home catering business? Great. What happens when a client gets food poisoning and blames the products? 

As a sole proprietor, the cook can be held liable for any and all business liabilities. 

Every business carries risks, but there are ways of mitigating risks and protecting personal assets. Before running a credit check for a loan for a storefront or taking a batch of pastries to the food market, the business must be born as its own entity.

For example, as a single-member LLC (Limited Liability Company), Patrick’s Perfect Pastries, LLC is a separate legal entity from Patrick. While Patrick may run the business and operations, the LLC has its own federal identification number, pays taxes, has a bank account, and is held responsible for damages in the case of misfortune. 

In other words, if Patrick’s client does not know to refrigerate their white-chocolate raspberry cheesecake, leaves it out for three days, then wants to blame Patrick for becoming ill, the LLC takes the financial hit in the case of damages, rather than Patrick. 

There are fees associated with starting an LLC, and the business must stay in compliance, cannot be recognized globally, and might be taxed in other countries. However, the major benefits are that a board of directors is not required, and personal property/assets are protected from any business liability. 

Businesses can also become an S Corporation (S Corp), which allows up to a maximum of 100 shareholders that all have common stock in the company, which essentially means that all shareholders have voting rights and receive dividends based on their number of shares. S Corps are required to have board members and hold meetings with strict rules on keeping records of the minutes. C Corps are similar to S Corps but are recognized internationally, and owners may get preferred stock in the company, which comes with priority to receive dividends. 

Choosing the entity type depends on the business model and preferences of the owner. While a tech company specializing in global mitigation of cyber threats might prefer international recognition that comes from a C Corp, a landlord trying to lease a single recently purchased townhome would likely benefit more from an LLC, as would an artisan selling arts and crafts at a farmers market or starting a home cottage.

In Florida, sunbiz.org is a great resource for establishing an LLC, but law offices also specialize in helping with Articles of Organization and registering. Additionally, legal teams carry the added benefit of offering legal advice during the formation of the business entity, as well as annual filing. 

After forming the entity, there are ways to generate funding beyond grinding away at the day job, such as taking advantage of Florida’s Small Business Loan Support Program, a state incentive to help new businesses. Tallahassee also has the Office of Economic Vitality with resources available to help new and developing businesses. Local municipalities also offer grants when trying to develop businesses in new or gentrified areas. 

Newly formed entities might face challenges trying to build the credit necessary to qualify for a loan. One trick is to get a credit card from a retailer, such as a home goods store, home improvement store, or a larger bank. Even if there is an annual fee for the first card, using it each month will establish credit for the business and help with future loans. 

There are also cost-saving measures and incubators (See Domi Station in Tallahassee or Co:Lab in Pensacola) that offer cheaper rent for certain types of businesses, as well as shared working space and other intangible resources. Rather than going all-in and pouring savings into a dream, it could be worthwhile to rent a kiosk in a strip mall for a retail business—see The Garden in Pensacola (page 56) that also offers a launch pad for retailers. Other options are opening a kiosk inside a hospital or college, which will help to generate revenue and a customer base with minimal overhead before trying to open a permanent storefront. 

While having a passion is a good start, successful entrepreneurs need to understand their markets and demographics, which requires research and planning before the launch.