Four financial moves you should make before starting your own business

Many folks aspire to start their own businesses. Why work for someone else when you can work for yourself? According to the Small Business Administration, there are over 30 million small businesses in the United States alone. Yet while starting a company could make your dreams come true, you’ll also have to take on risks. That’s why you should make some smart money moves before starting up.

First, you’ll want to create an emergency fund for both your enterprise and also your family. More than 80 percent of small business failures are due to cash flow problems, often because the company simply doesn’t have the money it needs. As for your family, you may lose income when leaving a job to start a business. Your family emergency fund should be able to keep your family afloat for at least six months, if not a year.

You’ll also want to pay down as much debt as possible before starting a business. You may not be able to pay off your mortgage right now, but if you can pay down credit card debt, that’s one less monthly cost to worry about.

Speaking of bills, if you strike out on your own, you may not have health insurance coverage. If you have a spouse who’s working, check to see if he or she can get health insurance coverage through their employer. If not, you’ll want to look for private insurance policies.

Finally, it’s often wise to set up a company as a separate legal entity and to then set up bank accounts and other financial assets in the company’s name. This helps separate your personal finances from your business finances. It could also help you lower your tax bills and financial liabilities in the long run.