In the first 11 months of 2025, more than 5.1 million new business applications were filed. If you’re looking to become a statistic—a new business—there’s a lot to think about before you commit. And what to think about goes way beyond having a good idea and the capital to get started. Here are 3 key areas to also think long and hard about: your risk tolerance, your location, and your ability to deal with rules and regulations.
What to consider:
Risk in starting a business
“If you’re not a risk taker, you should get the hell out of business.” – Ray Kroc, McDonald’s Founder
Starting a business is all about risk. You’re putting your time, money, and ego on the line and you can lose it all. What is your risk tolerance? What is the amount of loss and uncertainty you’re capable of handling? FasterCapital has an extensive guide on What is Risk Tolerance Assessment for Business Owners.
Recognize that statistics show the deck is stacked against you when you start a business, meaning that the risk is great. According to BLS, about 20% don’t make it past the first year, and about half are out of business by the fifth year.
Just in case your business should fail, it’s important to protect your personal assets from the get-go.
- Choose a protective business structure. If you incorporate or form a limited liability company, you obtain personal liability protection for your personal assets…your home, your car, etc. Creditors can’t touch your personal assets.
- Carry sufficient insurance. Whether or not you use a protective business structure, you can address risks by having sufficient insurance for various contingencies. At a minimum, you need a business owner’s policy (BOP) to cover your business property from fire, theft, and other losses and to afford you liability protection for claims from third parties (e.g., a customer injured on your premises).
Best place to start a business
The oft-touted key to homeownership is location, location, location. Well, maybe the same thing can be said about where to start a business. According to WalletHub, “bad location” is one of the main reasons that businesses fail. Its recent survey found the best—and worst—places to start a business, factoring in the business environment, access to resources, and business costs. The top 5 (overall rank) are:
- Florida
- Utah
- Texas
- Oklahoma
- Idaho
The worst 5 are: Rhode Island (50), Maryland (49), Hawaii (48), Connecticut (47), and New Jersey (46).
Just because you’re in a state with a less than favorable rating doesn’t mean you can’t be successful in business. You might just have to work a little harder and overcome more obstacles. If you have the flexibility to relocate, think what location would work best for you personally, and for your business.
Compliance challenges
Red tape, city hall, and all the other cliches about dealing with government come into play when you start and run a business. Be prepared—with time, money, and most of all patience—in complying with federal, state, and local laws. For example, if you open a store or restaurant on Main Street, you can’t post a sign unless and until you meet local requirements. One business I know had to wait many months before its signage issue was resolved.
Some compliance issues to be aware of:
- Business licenses and registration. Determine what to file locally and with your state. If you’re a professional starting a business or practice, determine what you must do.
- Employer obligations. If your business has employees (including you if you incorporate), be sure to know all the forms that need to be completed (e.g., Form I-9; Form W-4), all the quarterly and annually filings (e.g., Form 941; Form 940), and insurance costs (e.g., workers’ comp; state unemployment insurance).
- Industry-specific rules. Depending on the industry your business is in, you face specific compliance obligations with various federal departments and agencies, including OSHA, DOL, IRS, and FTC.
- Keeping books and records. You’re required to do this for tax purposes, but it’s vital to do so for understanding what’s happening in your business.
Final thought
There’s much more to starting a business than simply determining the viability of an idea, raising capital, and getting your spouse, partner, or others onboard, etc. But don’t overlook your risk tolerance, your location, and your ability to deal with rules and regulations.
For additional help concerning compliance issues, see this list of blogs.
