My grandfather was a practical, business savvy man who opened a fairly successful business in Dallas, TX with his brother. His children to his dismay did not follow in his footsteps. He blamed the fact that they couldn’t seem to save more than $2000 between them at one time on things being too easy. To make up for this fact, he used our desire to open a lemonade stand each year to teach his grandchildren about the financial requirements of opening a small business.
Renovations
As a child, I learned that finding an area to lease or purchase was only the beginning. There was only one area that we were allowed to rent: a strip of land at the edge of my grandfather’s house that he let go wild each year as the lemonade stand season approached.Before opening we were required to rent the mower, buy the gas, and mow the lawn.
As you plan the finances for your business, you should assume that the building that you lease will need to be renovated before you can open. This may require paying for the equipment, materials, and labor.
Insurance
Every late spring, summer, and early fall we were urged to invest in business insurance for 4 dollars a month to protect our small lemonade stand. While we were not required to purchase business insurance, we learned the hard way that failure to do so would result in financial hardship later on. Every summer our lemonade stand broke, our sugar became infested with gnats, and our supplies were stolen.
As a small business owner, the business insurance in Dallas or your equivalent area will protect your finances from unforeseen disaster. Business insurance protects you against the financial strain of coming up with money to cover liability lawsuits, damages, loss of product, or the inability to run your business in some circumstances. Business insurance is not mandatory and may not even be needed, so I would only invest in business insurance when your finances become more stable.
Permits
Depending on what your business plans to sell, buy, transport, or create, you may need to apply for a state or federal permit. In my family lemonade was a regulated commodity. Before we were allowed to sell a single glass of lemonade, we were required to pay five dollars for the permit that gave us the right to sell. The one summer we forgot to receive the proper permit, we given a monetary fine of fifty dollars.
For your small business, the consequences of failing to obtain a permit can be worse. Real life consequences include: high monetary fines, the suspension of your business or ability to sell that particular item, and in rare cases you may face criminal charges. To prevent that you should check to make sure that you do not need to apply for any permits here.
Taxes
In the lemonade business, my grandfather kept our taxes simple. As business owners we were required to pay a ten dollar tax each year. We never forgot to pay our taxes, but if we had I’m sure he would’ve fined us the following year.
When you open your business, it is imperative that you determine what taxes you will be required to pay before starting your business. The taxes that you must pay as a business owner will depend on what type of business you are opening: sole proprietorship, partnership, corporation, or LLC. Some taxes that you might be responsible for are:
- A pay-as-you-go annual income tax,
- A Medicare and social security tax called the self-employment tax.
- Excise taxes if you sell, produce, manufacture certain products or run certain facilities and equipment.
As a business owner you are required to pay and file your taxes. Failure to do either can result in fines. If you can’t pay your taxes, you should file your taxes, pay as much as you can, and get in contact with an IRS agent. He or she will help you determine what you need to do next. This should limit your fines and allow you to pay back your taxes as quickly as possible.
When I was young opening a lemonade stand taught me more about business than I bargained for. Renovation, insurance, permits, and taxes are four monetary obligations I did not foresee that first summer which meant my first business endeavor was a financial disaster. With careful planning, you can ensure that your business is prepared to pay for these unexpected expenses.
The only business Allen Grove ever started was a small lemonade stand in his youth. It was a nightmarish experience that reinforced the fact that he was better suited to writing about business.
Making lemonade out of lemons isn’t so easy now, is it? Whatever the nature of your small business, it needs a lot of planning before you get started. If you don’t know much about business structures, permits and taxes, then at least consult with someone who does before wading into it.
Great post with info that small business owners can use. I would like to add legal expenses also in this list , as you may need services of a legal professional also, from time to time !