Beyond the LLC: 5 must dos for a profitable and protected enterprise

If you don’t intend to operate a business as a sole proprietorship under your own name (or a “doing business as” name), you need to decide what type of entity to organize to operate your business as a separate legal entity. That entity, depending on the state, could take a number of forms—a corporation, limited liability company, limited liability partnership, to name a few. Once you have established which entity type works best for your business type and tax strategy, you’re ready to go right? Not quite. There are more decisions to make in addition to entity structure.

Define your company’s scope

Where will you “play”? What industry? What products? What services? To whom will you sell your products and services? None of this is set in stone. You can make changes to your company’s product or service mix as well as your desired industry, but you should have a clear understanding to start. Knowing your scope enables you to determine what laws and regulations you must follow in your given industry and for your product or service mix.

Establish roles and responsibilities

Even if you are just starting, understanding the core roles your business needs to fill, what those roles are responsible for, and how quickly you need to fill them are essential to understanding how you will operate your business effectively. It will also help you understand the gaps you will need to fill in the interim so nothing critical gets neglected.

Set policies

Policies provide clarity regarding your expectations for your business. If you have a company vehicle, you may have a policy outlining your expectations around how your employees may or may not use the company vehicle. Depending on the regulations that govern your industry, you may have internal policies that ensure your employees are performing their business responsibilities in accordance with those policies. Ideally, you strike a balance between too few and too many policies. Too many, and people feel stifled and unable to fulfill their roles with a measure of freedom. That matters if you are striving to build a company that continues to grow and innovate.

Establish procedures

Every business has critical tasks that need to be completed for the business to operate. Those tasks are typically repetitive and can often be performed the same way every time. Those tasks that are most often performed warrant establishing processes to ensure they are performed in the most effective and efficient manner. Procedures should be documented and accessible by everyone who needs to perform the documented responsibilities. Employees should be trained on the new procedures. The procedures should be updated as needed to reflect the actual work being done.

Know your risks

Every company has risks. Some of those risks are more costly to the company than others. Knowing where your company could potentially incur costly liability is vital to understanding how to operate your business to avoid those unnecessary expenses. Map out your company’s potential risks. For example, if you bake cakes, a key ingredient supplier could be unavailable. Your refrigeration system could shut down. A customer may get sick from your product. You could fail an inspection. For each identified risk, map out what would need to happen for the risk to occur and what needs to happen to avoid the risk.

Establishing your business entity can be an exciting and rewarding pursuit, but it’s just the start. Take time to build out the other areas of your business that are critical to its long-term success.