How To Setting Up a Business

Going about setting up a
business is not as difficult as it
may seem. There are a few
basic requirements you need
falling into the categories of
business structure, registration
with government authorities,
and permits/licenses.
The first issue to decide for
setting up a business is
structure. Structure means the
form of the business, and you
can either have a sole
proprietorship, partnership,
limited liability company (LLC),
or corporation. Keep in mind
that there is no "correct"
answer, and your business
structure can change as your
business changes. A sole
proprietorship is the easiest
way to get started; it simply
means that the individual is
operating the business. The
main disadvantage (when
setting up a business) of a sole
proprietorship is liability. Your
businesses liabilities are your
personal liabilities, and
therefore your personal assets
are also susceptible to claim if
your business owes money.
The main advantage is
simplicity in creation, and in
taxation.
Partnerships are similar to sole
proprietorship and taxation.
The key thing to remember
about partnerships is to have
partnership agreements in
place. These are written
documentations explaining
what will happen if a person
decides to leave the
partnership, how the profit is
split up, and other
contingencies about various
business scenarios.
A corporation is a pseudo-
person who represents the
business. The corporation is
headed by a board of
directors, and responsible to
shareholders. Corporations are
governed by the state in which
they are created, and there
are more complex laws
regarding reporting and
taxation. You will likely need
some expert or lawyer to help
you get started with a
corporation. For small
businesses, an S-Corp is a
popular choice as it is a simple
form of corporation and profit
and loss is passed to the
owners.
An LLC is a hybrid between a
partnership and corporation.
Liability is limited, but
administration is not as
complex as a corporation.
Likely, businesses needing
liability protection will choose
between an S-Corp and LLC.
The decision mostly comes
down to which is more
beneficial for tax purposes,
and your taxation situation will
vary depending on the state in
which you live.
The key point regarding
liability is that if you have an
LLC or corporation, you want
to run your business separate
from your personal life. If you
mix accounts; if you take
personal expenses as
corporate expenses, and
generally mix your actions so
that you are running the
corporation not as a director,
but as your own personal
business, you may be
endangering your protection.
When you act or sign, consider
that your actions are on behalf
of the corporation, and as a
representative of shareholders.
This is why liability board
meetings, meeting notes, and
so on have value as they
formalize the actions of the
corporation.
Registration with the
Government Employer
Identification Number (EIN)
and State Registration.