Business, it’s all about risk. Just like entrepreneurship it is risk. Why, because if you’re planning to venture a business, think about this, you only have 20% chance of making it through the first five years. And most start-ups died on its two years of operations.
You tell me of people bragging about their ventures, sipping expensive wine, while wheeling and dealing their way to fortune. Please, not those government peepz you know, okay! They can always make a fortune out of taxpayer’s money. Ha ha ha. Anyway, after a year or two, after they entered the business arena, you will see if these people are the same people telling you of their businesses. Perhaps, some will still exaggerate about anything. Some are discouraged. However, others are frightened people who lost everything they owned and facing the prospects of personal bankruptcy.
These people are invariably the full-time dreamers who only see the “benefit” side of the equation and never the “downside”
risk. They ignore the possibility of failure until it’s too late. Most dreamers don’t start smart by taking at the outset the precautionary steps to protect themselves against a less than a prosperous business future.
Anyhow, we can always get away with this by looking at the risks, things that we can apply to possibly reduced it. The objective is to weigh the “benefit – risk” ratio of the business venture and only move ahead when the possible gains outweigh what we stand to lose. We need to be objective. You have to look at yourself as one entity and the business as another. The relationship between the two must make economic sense. Ask yourself, can this business possibly provide sufficient return to risk what I am gambling? Are there steps I can take now to reduce what I can lose?
We need to minimize risk because it will —
1. Keep your personal investment to a minimum, protecting what you do invest.
2. Protect valuable personal assets from hungry business creditors.
3. Free you from personal liability on business debts.
4. Put you in the best defensive posture so you, and not your creditors, have the upper hand if the business goes sour.
5. Keep your personal resources intact so you can bounce back and try again.
Anyhow, next, I will talk about why corporation is a must in reducing risk.
So see you around.
Bong Corpuz & Co. CPAs 