Set Up Your Business - in Minutes!
We have a DIY option you can use to save time and stress.We help you:
- Determine the best business structure
- File the right paperwork
- Stay compliant with the law
Prefer to work with a lawyer?Find one right now.
Created by FindLaw's team of legal writers and editors | Last reviewed September 23, 2022
This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw’s team of legal writers and attorneys and in accordance with our editorial standards.
The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area.
We make business formation EASY. Learn about our DIY business formation services here.
If you are in the beginning stages of forming your small business, you'll soon learn there are a number of important decisions you will need to make to give your new venture the best possible chance at success. As you wade through the first steps in starting your small business, you'll come across issues such as naming your business, creating a business plan, start-up financing, business licenses and permits, and more. One of the most important accounting-related matters to understand is the balance sheet.
This financial statement provides a snapshot of your business’s financial health. If you are thinking of applying for a business loan or seeking to woo investors, you'll need to show a balance sheet to show the success of your business and prove that your idea is a good risk.
When seeking financing for your small business, your banker or lender may ask you for a balance sheet representing your current financial condition. If you are new to business accounting, it goes something like this. The balance sheet lists your assets and liabilities in one place. An asset is anything that has value, such as equipment, real estate or cash in your bank account. Liabilities are money you owe others, such as payroll, taxes, mortgages and more.
The key is equity. Equity represents the financial difference between your assets and liabilities. Capital or net worth, also known as "shareholder equity," is the money that would be left if a company sold all of its assets and paid off all of its liabilities.
Those who have a stake in your company's financial success will find the balance sheet invaluable because of the many ways to analyze the information it contains. Stakeholders can look at the proportion of current assets, which is a good way to measure a company's liquidity and its ability to handle unexpected expenses or undertake expansion projects.
The following provides an example of the types of information generally included in a business balance sheet. For more information, visit FindLaw's Small Business Law section.
Assets Cash $__________ Accounts receivable $__________ Inventory $__________ Short-term loans $__________ Prepaid expenses $__________ Long-term loans $__________ Land $__________ Buildings $__________ Improvements $__________ Equipment $__________ Furniture $__________ Vehicles $__________ Other Assets $__________ TOTAL ASSETS $__________ Liabilities Accounts payable $__________ Short-term notes payable $__________ Interest payable $__________ Taxes payable $__________ Long-term notes payable $__________ TOTAL LIABILITIES $__________ Capital or Owner's Equity Stock $__________ Retained earnings $__________ TOTAL CAPITAL or OWNER'S EQUITY $__________ (Total Assets will always equal Total Liabilities plus Total Capital) |
Keeping a firm grasp on your company's financial health is important to your continued success in the business world. Whether you are a sole proprietor or an LLC, speak to a skilled business and commercial law attorney in your jurisdiction to find out how you can maximize your profits and minimize your losses under the laws in your state.
Looking to start your own business? Use FindLaw's DIY forms to get a legal business entity set up in minutes.
Was this helpful?
Contact a qualified business attorney to help you navigate the process of starting a business.
We have a DIY option you can use to save time and stress.We help you:
Prefer to work with a lawyer?Find one right now.