Consider risks before going into business for yourself

Want to go into business for yourself? Think twice – or thrice – because it’s risky. Still, the potential rewards are great. If you’re thinking of doing it, here are some tips:

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Motley Fool

http://www.spokesmanreview.com/business/story.asp?ID=22095

• Spendthrifts and tightwads should forget about it. Spendthrifts will burn up funds faster than they come in on unnecessary stuff. Tightwads won’t spend enough. Insurance, licenses, supplies and other overhead items are expensive but necessary.

• Estimate how much it will cost before starting. Then double that amount. Try to keep a source of income as you start, perhaps working a part-time job. This can keep you from borrowing too much money.

• If you want to be taken seriously, do it right. Get the licenses you need. Get insurance. Pay taxes on your earnings.

• Be tax-smart. Know, for example, that you may be able to deduct some or all of your medical and qualified long-term care insurance costs.

• Consider being incorporated. It offers tax advantages, some liability protection and, most important, more credibility.

• Don’t be afraid to get professional consultations. You may save money in the short term by being your own accountant or lawyer, but the mistakes you make may cost you a lot more later. Professionals may even save you a bundle immediately.

• Look before you leap. Businesses that are easy to get into will have a lot of competition. Choose a business that has proven it can make money.

• Be wary of multi-level marketing (MLM) enterprises. It can be extremely difficult if your living depends on your recruiting others to join you. Learn more at http://www.vandruff.com/mlm.html and http://www.ftc.gov/bcp/conline/pubs/alerts/lotionalrt.htm.

• Read up, and talk to other self-employed folks. Get guidance at http://www.sba.gov, http://www.entrepreneur.com, http://www.irs.gov/businesses/small and http://www.business.gov.

• Do what you know and what you’re good at. Chances are you’ll do a good job and will bring in business. It’s best not to open a restaurant if you’ve never worked in that business.

If you do go into business for yourself, expect a real challenge. It can be well worth it, though. Good luck!
My smartest investment

Twelve years ago, my wife and I were sitting in a coffee shop in Cripple Creek, Colo., and overheard some locals talking about gambling on local real estate. When we returned home, we told my brother and his wife what we’d heard. The four of us invested $5,000 on five lots. A year later we sold those lots for $75,000. We also agreed to hold a 15-year mortgage at 10 percent, which would bring the repayment amount to nearly $115,000. Each couple’s investment of $2,500 will net them approximately $55,000 when all is said and done. Not bad for the price of two cups of coffee and being at the right spot at the right time. – Anthony J. Trivelli Jr., Townville, S.C.

The Fool Responds: Real estate has been a terrific investment for many people. Still, you should know what you’re doing and realize that even real estate investments can implode – particularly if you invest in the wrong place or at the wrong time.

Ask the Fool

Q: What does the Securities and Exchange Commission (SEC) actually do? – K.D., Amarillo, Texas

A: You’ll find lots of info on the SEC at its Web site, http://www.sec.gov. In its own words, the SEC’s primary mission "is to protect investors and maintain the integrity of the securities markets." It goes on to explain: "The laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: All investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it. To achieve this, the SEC requires public companies to disclose meaningful financial and other information to the public, which provides a common pool of knowledge for all investors to use to judge for themselves if a company’s securities are a good investment."

Of course, as Enron and others have painfully reminded us, companies are not always straightforward or accurate in the information they disclose. The SEC, therefore, brings charges against many companies and individuals for breaking securities laws – typically more than 400 per year. Go get ’em, SEC!

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