Separate Entity - Critical Business Concept

First Step In Starting Up Your Business

The Entity Concept

The Entity Concept states that we should treat any business as a separate entity which is independent from your family, your friends, or even yourself! 

Simply put, you should treat your business as a separate individual who lives and breathes separately as a separate entity.  "He" or "she" should have his or her own identity, goals to achieve, a mission to accomplish or even a passion to embrace with.

This is the very first lesson from any business school. Believe it or not, for an average work-at-home or self-employed entrepreneur, it's one of the most difficult concepts to master. 

The entity concept is simple, but is actually difficult in application especially for small or family business owners.  Don't take it lightly.  

Entity concept is perhaps the most important lesson one should learn in business.  It has very important implication.

Side point:

*******************
A friend of mine is engaged and getting married next year. His wife is a self-employed while my friend is a professional firm manager.

Should the couple pull their resources together as a family? or should she treat her business or should she incorporate her business before their marriage?

The implication are several folds, but the most obvious one is, what if the business fails and ends up in bankruptcy.

*******************

Can you see why the entity concept is important.  It can literally makes or breaks you.

General Advices:
1) Separate your bills from your family expenses
2) Use a separate credit card for your purchases
3) Open a separate bank account for all your business activities
4) Record all your revenue/ expenses separately

In all, do and record everything separate from your own personal matter, especially financially. It's essential that you have a business for the long run and minimize your potential problems down the road. 

***************************************
Roy Chan is a CPA and business consultant.  He has been providing business advices to internet marketers since 2004. He also reviews useful internet marketing and business tools reviews for business owners. To subscribe his 7 steps to small business success, go to:
http://www.wealthyhub.com
***************************************