When starting a new business, owners are faced with a long task list. What type of legal entity, if any, should I use? How much startup capital is needed?
If I don’t have equity capital, can I obtain a loan? Do I need a partner? How many, if any, employees do I need? Should I use or do I need subcontractors?
Finally, how do I successfully market and sell the new firm’s products and services?
Each of these tasks, plus myriad others, involve forms, records and documents. These documents form the paper trail for the new business that will be called upon in the following circumstances:
- Obtaining credit or loans
- Filing of tax (income, business and occupation and sales tax) and employee withholding returns with federal and state agencies
- Compliance with employee hiring and termination laws
- Pursuing and defending lawsuits
- Audits (tax, safety or quality)
Owners who do not adequately establish systems for maintaining these records can face difficult circumstances. For example, presume that you have a new retail business located in a commercial building.
Ten months after opening, a defective water valve causes a catastrophic flood and destroys your inventory stock. Losses are severe enough to potentially force your business to close.
Without adequate inventory records, it can be very difficult to establish the value of such stock for insurance or to potentially pursue a litigation claim as a result of such loss.
Without adequate records of profit and loss, it can be very difficult, it not impossible, to establish lost income. All of these measurements require the owner to establish durable systems for the maintaining of records.
Unfortunately, due to the universal law of entropy, these records, documents and receipts, if not properly organized at the birth of the business, will only become more difficult to properly organize later and will require significantly more energy and effort to properly organize.
It is all too easy to delay in establishing organizational systems for the maintenance of these records.
Attention! We are not attorneys and we are not lawyers. We cannot represent customers, select legal forms, or give advice on rights or laws. The article provided is for information ONLY and is NOT a substitute for the advice of a lawyer.