Here are some quick statistics for you:
- Over 99 percent of America’s 28.7 million firms are small businesses. The vast majority (88 percent) of employer firms have fewer than 20 employees, and nearly 40 percent of all enterprises have under $100k in revenue (Source: US Census Bureau, Business Dynamics: 2014).
- The average small business employee earned $45K in 2015. In general, the larger the business, the higher the average employee pay (Source: US Census Bureau, Business Dynamics: 2015).
- Overall, about two out of every three businesses with employees will last two years, and about half of those will last five years.(U.S. Bureau of Labor Statistics: 2018).
What does all this mean?
It means that start-ups, new businesses, and innovative ideas make-up the majority of the American economy, and an overwhelming number of people will at least once or twice in their lifetime try to start a business. The real question is: Will they survive?
Most businesses start out looking like the following:
- 1 to 2 Owners
- Service Based: Performing a service for a local city or area
- Owners are the operators (The ones performing the service)
- Owners have some form of technical training or education in the service they perform
- Owners have a limited budget to launch the business and will usually start without debt
These characteristics make up the vast majority of small businesses today, from Lawyers, Technicians, Contractors, to even the average house wife who has launched an internet business at home. They typically fall in the above category of Small business owner. They are usually masters of their craft, however know relatively little about how to correctly launch a new business.
Statistics show that the lack of administrative knowledge typically leads to poor choices, and those poor choices lead to small business failure within 2 years. The other half made it to the five year mark, because they acquired the right help to insure a successful start, but fell short in some other area of being able to manage their business. More than likely this area of mismanagement is financial in nature.
Here at Simple Start, we have found that the most common and critical error was not getting ahead of the administrative burden by setting up their LLC correctly. They know very little about what kind of tax status they should choose, and as a result wind up with a large tax bill after year one, ultimately leading to their first and untimely setback.
The Small Business owner we outlined above could have chosen the appropriate federal election and accessed the potential to save them anywhere from $20-$40K in taxes within the first two years. They don’t know this choice exists or how to make the choice to begin with.
That is why Simple Start is here; we service this need. We want to guide you to the appropriate option that will suit your business model and serve your immediate needs. You don’t want bad choices to haunt you all through those first critical years of starting a brand new business. More importantly, you need every dollar to reinvest in yourself. Setting up your LLC with the right service provider can give you an advantage from the start.
If the characteristics above describe you, then you need to read The S-Corp Example. This article will give you a very concise example of the potential savings you can experience by electing to be an S Corporation.
If you are interested in taking the next step, know that you could be up and running in as little as 15-30 minutes. Join Simple Start in helping make your new business have a promising future.