Startup vs Business: Which Should You Choose?
Just about everyone dreams of starting their own company, but not everyone knows the differences between a business and a startup. Many people jump into entrepreneurship without knowing what options are available to them, either because they’re unaware of the differences or they confuse the two concepts.
Let’s start by talking about startups. Some experts define a startup as any business with less than five years experience, while others use this definition: “A newly formed company working to solve a problem through innovation.” While there are no strict guidelines for how long you have to be in business before you can call yourself a startup, most experts agree that if you plan on staying small or just tinkering with your product before selling it at full price, then your new business is most likely a startup.
A startup is an inherently riskier business structure because you do not have the resources, time or capital to absorb damages that might result from your company’s failure, therefore it’s essential that you guard your idea at all costs. Many look at this lack of security as a positive aspect of the business world if they’re able to get their product on the market before anyone else can. If you’re successful in releasing your product and generating revenue, then opening up for investor funding becomes an attractive option while staying safe through liability insurance is also often seen as beneficial by new entrepreneurs who want some legal backing but cannot afford high premiums. Of course, even with these precautions, startups tend to fail at incredibly high rates, though the reasons vary from industry to industry. For instance, restaurants and retail stores tend to fail because of their high overhead and low demand for services in comparison to other types of businesses.
Now let’s talk about a business. This term covers just about any type of operation that creates goods or provides services and will last longer than one year (though there are exceptions). Businesses make up the majority of operations around the world and range greatly in size, from small tie-in shops like gas stations all the way up to multinational companies like Apple Inc., which we all know is pretty successful.
As you can see, there’s quite a gap between startups and businesses as far as what they entail and how they function, but there are a few similarities worth going over. First, each of them is a separate legal entity from the person or group that owns it. This means that you can be personally liable for your startup’s actions but not those of your business. Second, both startups and businesses need to acquire an Employer Identification Number (EIN) in order to open bank accounts.
Generally speaking, businesses are the most common type of company in existence because they provide stability and generate revenue where startups do not.
Now that we’ve gone over what each of these two concepts entails, you should have a better idea of which one is right for you. Do you want to start your own small business or would you rather try to launch a product? If you’re set on starting your own company, then be sure to protect it with liability insurance and seek investor funding if needed. On the other hand, if you’re content just putting together something quick and cheap without worrying about securing patents or trademarks, then by all means startup! However, before doing so make sure that your new enterprise is sustainable enough to be a business and not just a hobby.
Just about everyone dreams of starting their own company, but not everyone knows the differences between a business and a startup. Many people jump into entrepreneurship without knowing what options are available to them, either because they’re unaware of the differences or they confuse the two concepts. Let’s start by talking about startups. Some…