The moment you start charging people for some product or service, you've started a business. You might be mowing the neighbor's lawn or maybe picking up stuff at yard sales and listing it on eBay. >> On the other hand, you might have bigger ambitions and be launching your own app on the Apple App Store or Google Marketplace. >> Regardless of your choice, you have already become an entrepreneur. And that has some interesting implications for your personal financial planning and taxes. So, here's your first key tip. >> If you're going to be a business person, you will need to establish relationships with professionals you can trust. At a minimum, you will need a banker, an insurance agent, an accountant, and a lawyer. But don't just choose the one down the street. Or the first one you find when you Google slick lawyer dude. Instead, I recommend you find a business mentor. Preferably an older person who knows the ropes and has some connections in your field or your community. Who can introduce you to the network. You might even consider going to the local chamber of commerce and introducing yourself. Regardless, always be alert to incompetence and the scam artists. Now, as to why you need the help of these professionals. Let's work our way to some of the hurdles you're gonna have to jump over and start with the whole issue of liabilities. When you start any business activity, there's always the possibility that what you're doing or how you do it will either offend someone or fail to satisfy them. Justifiably or not, they may seek legal recourse, you could be sued. When I say you, I mean you. And this kind of liability can impact your personal finances in a huge way. As to how to assess your liability, it's a truism that all businesses can generate some liability, but it's the nature of your business that ultimately defines how much actual risk is involved. On one hand, if you launch a scrapbooking business, your biggest fear might be that one of your clients will suffer a paper cut. Not a lot of risk there. On the other hand, if you start up a document delivery service, you could actually injure someone in a car accident rushing somewhere to deliver that key document. Just because there's more risk doesn't mean you shouldn't pursue the delivery business. It just means you must be aware of the liability you're creating and consider ways you can reduce it and to limit your personal exposure. That's where both your accountant and your lawyer can be useful. Of course, the obvious way to reduce your risk in the delivery business is to drive carefully. And it's always a good idea for any business owner to establish a culture of safety and to institute procedures that will reduce accidents. However, driving the speed limit and stopping at every red light will not prevent every accident. And even if the other person causes the crash, a court could still easily find you at least partially responsible. Now here's another caution flag. You could also be liable if your product or service doesn't live up to the customer's expectations. Moreover that liability could exceed the cost of the good or service you're actually providing. Just imagine you're delivering an important cashier's check for a big big deal, and you get caught in traffic. Unfortunately that delay means you don't get the check to where it needs to be on time, and your client's important business deal blows up. The next thing you know, the person who hired you is coming after you for the million bucks she lost, not just the $20 bucks she paid you for your service. Now there are several things you can do to make sure you don't spend the rest of your life paying for the consequences of one bad day. One is choosing the right legal form for your business, which we'll be discussing shortly. Another good idea is to make sure you're properly insured. I know Alex has already discussed insurance, but it's important that you talk to your insurance agent about your planned business activity and get coverage before you engage in it. As my final key tip for this part of the lesson, please make sure you have in place the appropriate written agreements with your clients and your vendors to make sure your liability is limited to what you expect it to be. >> Roger that, Professor Autry. So, what are we going to tackle in part two of the lesson? >> Here's a clue, and it's a famous quote from conservative president Ronald Reagan. I've always felt that the nine most terrifying words in the English language are, I'm from the government and I'm here to help. >> So we'll be talking about regulations and taxes for a small business then? >> Exactly. [MUSIC]
