The 7 Risks You Must Address If You Own a Business

Being a business owner can be challenging. Here are 7 risks to watch out for, plus what you can do about them

1. Does the IRS Know that You Are a Business?

The IRS wants to know if you’re really running a business, especially since you can take tax deductions against any business expenses. There are nine factors that the IRS looks at to determine if you have a legitimate business. This is mainly an issue in the beginning of a business or if you’re running at loss.

If the IRS doesn’t think you have a business, you end up losing your deductions.

2. Not Knowing the Cash Flow Needs of Your Business

Learn how to accurately project your business cash flow needs. You need cash when times are tough. You need cash to build. You need cash to grow. Lack of cash is the single biggest reason why businesses fail.

3. No Strategies for Funding

Know where the cash from your business is coming from. Whether the money comes from your personal resources, business funding sources, or other people’s money, it is important to identify these sources and manage them according the projections of your business.

4. No Business Credit

It is oh so tempting to just use your own credit in the beginning with your business. But, it’s a trap. If you continue to personally guarantee your business credit, then you’re not building credit in the business’s name. One of the key advantages of having business credit is that instead of putting your personal credit and assets at risk every time your company requires financing, you would now be in a position to secure the financing you need with the credit of your business.

Learn about the 8 steps to building business credit in Chapter 7 of “Smart Business Stupid Business.”

5. Bad Partnerships

Ask most business people their most horrendous business story, and it will almost always involve a partner. You’re with that person in a relationship that doesn’t always have clear-cut guidelines on how to deal with change. When that inevitable change occurs, there can be a lot of upset. This is especially true in regards to money. Having a partner withdraw from a business at a critical time can kill a business that otherwise would have been successful. Before you go into business with a partner, consider why you want a partner.

6. Protect Yourself from the Enemy Within (Your Bad Employee)

Employee theft and embezzlement can run the gauntlet from low-level employees stealing office supplies to partners who bankrupt companies. It’s uncomfortable. It’s unpleasant. And it’s not something you want to think about. Yet it happens more than you might suspect.

We’ve got 25 strategies to build an anti-theft zone in your business in Chapter 10: Are Your Employees Ripping You Off? of “Smart Business Stupid Business.”

7. Paying Too Much in Taxes or Taking Risky Tax Positions

Taxes are traditionally the highest business expense there is. And with the new tax laws coming your way, you can count on them getting even higher. Even worse for the growing business, though, is the risk from an audit. Audits can take up precious time and money and you can end up owing a lot in penalties and interest if you’ve done something wrong.

It’s critical to get good tax advice for your business.

Owning a business is risky. However, the pros far outweigh the cons. Address the risks. Take smart steps and build a Smart Business!