You have a great idea for a small business. You have a solid business plan. Your next step is to sort through the legal issues of starting a small business, but where do you start? Making informed decisions in the early stages sets you up for success from day one. The following list covers some of the legal aspects of starting a small business and how our New Small Business Filing Plan can get you on the right track without the headaches of paperwork. Click here to learn more about this service right now or read on to discover the legal aspects our services take care of for you!

What type of business are you forming?

There are a few options: sole proprietorships, general partnerships, limited liability companies (LLCs), and corporations. When selecting a business type, there are a few factors to consider, such as limiting your personal liability, tax treatment and benefits, and sale of interests in the business.

• A sole proprietorship leaves your personal assets at risk in the event of a lawsuit against your business, meaning that you could lose your home, your personal savings, and other assets.

• General partnerships can leave you with more risk because not only are you responsible for your own liability, but you are also responsible for certain actions by your partner(s).

• A Limited Liability Company structure can protect your personal assets and limits personal liability if your business ever gets sued or declares bankruptcy. This means that your personal home and other assets won't be at risk. With an LLC, you can file your taxes as part of your personal income, but you will probably have to pay self-employment tax.

• An S-Corp is a corporation that, for federal tax purposes, is treated as a pass-through entity, meaning that S-Corps are taxed under Subchapter S of the Internal Revenue Code (IRC), which is where the name “S-Corp” comes from. An S-Corp can issue stock, has governors (board of directors, officers, and shareholders). Owners of an S-Corp enjoy the same personal protection from liability as with a C-Corp; however, an S-Corp passes its income and loss through shareholders, eliminating the “double taxation” of having to pay taxes as both the owner and the company. Each shareholder is subject to his or her own individual tax rate on profits and losses passed through to him or her, recorded as net income on a tax return.

• A C-Corp creates a legal entity that is entirely separate from the owner(s). Structuring your business as a corporation provides the greatest level of personal protection from liability, but they are more expensive and complicated to form, and they file a separate income tax on their profits.

Should you form an LLC or a Corporation?

Depending on how you plan to deal with tax issues, record keeping, funding sources, ownership, and the physical location of your business, the best way to decide what type of entity best suits your new business is to consult an experienced business consultant or attorney.

Some businesses register in states other than where they are physically located for tax or regulatory reasons, but decisions like these should only be made after consulting with a professional who can walk you through these considerations with your specific business in mind. Registering out-of-state can end up being costly as you will still be required to register your business in the state or province where it is located, which may mean additional fees, taxes, and other costs.

Will you need specialized permits or licenses?

Registering your business is not the same as obtaining the necessary permits and licenses, and there may be local regulations in the county or city where your business is located to consider, as well. Some permits and licenses are only issued by the county or city, and you will need to know what permits and licenses you will need. An experienced business consultant or attorney should be able to take your specific situation into account to give you advice on what licenses and permits you will need to open your new small business.

Will you hire employees or use independent contractors?

Depending on your level of control over how, where, and when they work, the IRS determines whether your labor force are employees or contractors. Additionally, the number of employees is a factor in determining your company's taxes, as well as determining the healthcare and human resource regulations your business will have to provide. Understanding how these regulations may affect your business is another great reason to contact a professional for advice as you build your new small business.

If you want to start getting the paperwork for your startup handled quickly, easily, and conveniently so you can focus on your business, call (208) 755-8335 or email me at debbie@debbieaferguson.com

Click here to learn more about my New Small Business Filing Package!