In every economic downturn, corporations shed employees to shave costs. And in every economic downturn, many of those let-go employees make lemons out of lemonade by starting that small business they've always dreamed of operating, whether it involves doing what they were doing as an employee or trying something entirely different.

Like all small-business owners, newbies need to start off on the right foot by avoiding legal, tax and financial problems that too often trip up the freshly self-employed. Here are five tips for making your launch successful.

1. Create the right legal structure
One of the first questions every small-busines owner must consider is whether to operate as a sole proprietorship or as a corporate entity. "You automatically start out as a sole proprietorship," says Certified Financial Planner David M. Williams, founding director of Business Enhancement Associates LLC in Cordova, Tenn.
Operating as a sole proprietor costs no money because you don't have to pay to create corporate documents and tax returns. Whether you should continue to operate as a sole proprietor, however, depends on your business and personal risk tolerance.

2. Pay taxes -- if you must
The way you structure your business will provide guidance as to how soon you need to begin paying taxes on your earnings. Though there can be twists, the general rule is that if you operate as a sole proprietorship, you don't need to begin immediately paying taxes. "Going by the letter of the law, if you make more than the de minimus amount of $400, you're supposed to file taxes quarterly," says Williams. "But there are no penalties if during the year you shift from being an employee to being self-employed and you don't make quarterly tax payments."

3. Set aside self-employment taxes
When you're an employee, your employer withholds roughly 15.3 percent of your income to fund Social Security. You pay half out of your pocket, and your employer covers the other half. When you're self-employed, you shoulder the entire amount. You don't have to make quarterly payments to cover the tax, but you can avoid getting stung at tax time by setting aside funds to cover those taxes.

4. Think hard about whether insurance is necessary
Few startups have extra capital to spend on insurance they don't really need. Can you save a buck by going without? "In general, you don't need insurance until you hire your first employee, and then you'll need a lot of insurance," says Mazzella. "If you're working out of your home and your only liability is someone tripping and falling during a visit or losing your office equipment in a fire, you can make sure your homeowners insurance covers that. If you're operating outside your home, you'll want a minimum of insurance on your office and assets."

5. Make sure you get paid
What good is being your own boss if you don't get paid for your work? "Wherever possible, collect 10 (percent), 15 (percent) or 25 percent of your fee upfront," says Bostrom. "Your clients' reaction to that request will tell you a lot about whether they're capable of paying you."
Always use contracts, recommends Alan Siege, president and CEO of Small Business Management Consulting in Brooklyn, N.Y. "Specify clearly what the deliverable are and what and when people will pay you -- and make people acknowledge it. By having a contract, you're saying that you play for real and that you're someone whose business people need to take seriously."

Thanks although i didn't read through

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