One of the top reasons why businesses fail in the first few years is due to the fact that they were not set up correctly to begin with. If you are setting up your collection business with a business partner, make sure you have your business agreement, exit strategy, and legal documents set up prior to opening your doors. I don’t care who you are, MONEY CHANGES PEOPLE. Once money starts coming in the door, the temptation to do dishonest or unethical things is far too great for some people to resist. In order to protect your assets, your business, and your livelihood, it is helpful to consult with a business attorney or speak with others who have experience in business contracts.
Depending on the rules in your state, you may want to incorporate your business differently. You may choose to start a C Corporation, or an S Corporation so you have the corporate umbrella to protect you. There are pros and cons to corporations. If you are a larger collection agency or plan to be larger, you may chose to incorporate to take advantage of the benefits that come with a corporation. For most of you, you will be establishing a Sole Proprietorship or LLC (Limited Liability Corporation). These tend to have the best tax advantages to them, but can often be lacking in the legal protection that comes from a corporation.
Regardless of which route you chose in setting up your business, make sure you have a solid business plan and exit strategy in place before you open your doors. It is worth the time and a little money to make sure you have this document reviewed by experienced eyes prior to finalizing it. This document alone, provided it is put together well, will do more to protect your business and assets than almost anything else you can do.