3 Mistakes to Avoid when Starting a New Local Business

Updated: Jul 6

Starting a new local business has its challenges, and mistakes can be made throughout the process. When starting a small and local business, avoid these three common mistakes.




Mistake #1: Not Choosing a Business Structure

Every business needs to be legally classified as a business structure. There are a few business structures that are recognized in the United States. Since there are several business structures you can choose to form, each one has its own benefits and drawbacks.


What is a Business Structure?

Your local government, state government, and the IRS will need to classify your business as a certain business structure. A business structure is a government classification that indicates how your business is managed, how it will be treated in the legal system, and how it will be taxed.


In the United States, there are four main business structures for businesses that are not non-profits which are:

  1. Sole Proprietorship ​​​​

  2. Partnership

  3. Limited Liability Company (LLC)

  4. Corporation (S-Corp or C-Corp)

Each business structure has its unique features that you will need to further research to help you decide which business structure is the best for your business.

Since every business is unique, choosing the right business structure will require that you learn the important details about each business structure and determine which one is the most beneficial for your business.


Learn from the experts by visiting these sites:

These sites specialize in helping new business owners learn more about business structures.

How to Form a Business Structure

To form a business, you will need to file paperwork in your state and pay state fees. The documents required for each business structure are different.


A common document that sole proprietorships


If you choose to form a limited liability company or a corporation, the paperwork is greater and can be complicated, and it's best to use a professional filing service.

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You don't want to make mistakes on legal paperwork, instead, use a professional filing service that will do the filing for you. Consider Inc Authority as your first choice which has an excellent customer rating on Trustpilot.





Mistake #2: Not Having a Business License

A business license gives you the legal right to operate your business in a certain area such as a city, county, or state. However, avoid the mistake of not having a business license or not having all of the business licenses your business is required to have.


Do All Local Businesses Need a Business License?

Almost all small and local businesses will need a business license. Some businesses may just need a local business license while others may also need an additional state and even a federal business license.


If your business will operate in more than one city, you will also need a business license for each city since each city has its own business license program and requirements.


Operating a business without a business license is risky. Many potential customers or clients will expect or assume that your business is properly licensed. People can even report your business to your city or state for not having a business license which can lead to legal troubles.

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Mistake #3: Not Having Business Insurance

If there's an accident and your business is held responsible to pay for injuries and damages, can your business afford to pay out-of-pocket? Operating a business without insurance is risky and can be expensive.


Which Businesses Need Business Insurance?

Every business has some level of risk that can result in physical and non-physical injury or damage. Here are some scenarios that can happen for different types of businesses:

  • Someone slips and falls in your office and gets physically injured

  • A customer gets severely sick from eating at your restaurant

  • While working in a client's home you accidentally damage or break something

  • You provide professional advice that causes monetary or reputational damage to a client

  • A product you sell causes an injury to a customer

  • An employee is negligent and causes an injury or damage to a customer/client

  • You or an employee gets into a car accident while driving a company vehicle

Without business insurance, these types of incidents can cost you thousands and even millions depending on the severity and how many people are affected.


What Insurance Coverage do Local Businesses Need?

Depending on your business, the type of coverage your business will need will vary. Some businesses may just need basic coverage, while other businesses may need additional coverage.


Here's a list of common insurance coverages your business may need:

  • General Liability

  • Commercial Auto

  • Commercial Property

  • Professional Liability

  • Worker's Compensation


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