Choose the right business structure
As you choose a business structure look at one that reduces your risk load. Working as a sole proprietorship put everything at risk and it can cause you to lose your entire establishment and even your personal assets. Protect yourself by choosing an LLC or another structure that keeps your business and personal assets separate from one another. A LLC and a corporation are two business structures that will keep your personal assets safe because the business is responsible for repaying the debts, not you personally. Another option is to choose a sole proprietorship or a partnership if you aren't too concerned about your personal assets and you feel the business won't have a need to use your home or other assets to pay off debt. This is riskier but you aren't facing double taxation like you are with LLCs and corporations.
How much ownership would you like to have over the company? This will play another important role in selecting the business structure. A sole proprietor is the only owner, giving you complete control. A LLC and corporation and partnership can all have multiple owners so you don't have as much control. This also makes a difference with taxes and liabilities so you need to carefully consider your options when determining the type of control you wish to have over the company.
Starting a business is going to require investment from you and possibly others. You must be able to have the funds necessary to start the company. How much money will you need to personally contribute to the company? What about your personal credit? Will it be used in the event that you need to acquire loans for the business? How much time do you have to devote to getting the business up and running? What about the paperwork that needs to be properly filed in order to create the business? In many cases you can start a sole proprietorship without doing anything but your LLC and other businesses will require more paperwork to get it started. To file LLC paperwork you are looking at a cost of about $500 in most states and with the Federal government.
Now onto one of the most important parts of a business, the business taxes. You must be able to understand what your tax obligations will be and properly abide by them or face penalties. Always pay your quarterly taxes correctly and make sure you educate yourself on the business taxes so you know what is considered a deduction and what isn't. Taxes on your portion of the profits for the business has been paid and you might also have a higher personal tax bill to pay as well. It is a good idea to meet with an attorney and a CPA in order to figure out your tax laws and how it will impact your tax situation. This way you will be able to understand the structure of your business but also learn how changing to a different structure may be able to help you save money and keep your personal assets safer.
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Posted by DK