Choosing your business structure is just as important - if not
more important - than marketing. You should consult with your
accountant or your attorney in forming your business. The
process in setting up your company is as follows; these are just
the key points that need to be done, but not necessarily in the
exact order listed.
First, you need to come up with a company name and ascertain if
the URL is available for that website. If the URL is available
for that name, the next step is to register that name with the
Secretary of State in the state that you reside in. At this
point, there are two options: One is to consult with your
accountant or CPA to decide if you should be a sole proprietor,
partnership, limited liability corporation or a Corporation. At
the very least, reserve the name with your Secretary of State
for a minimal fee while you decide what business entity you
should be.
Here are the four types of business structures and a brief
explanation of each:
1. Sole Proprietor - A Sole Proprietorship is one individual or
married couple in business alone. Sole proprietorships are the
most common form of business structure. This type of business is
simple to form and operate, and may enjoy greater flexibility of
management, less legal regulation, and fewer taxes. However, the
business owner is personally liable for all debts incurred by
the business.
2. Partnership - A General Partnership is composed of two or
more persons (usually not a married couple) who agree to
contribute money, labor, and/or skills to a business. Each
partner shares the profits, losses and management of the
business, and each partner is personally and equally liable for
debts of the partnership. Formal terms of the partnership are
usually contained in a written partnership agreement.
3. Limited Liability Corporation - A Limited Liability Company
(LLC) is composed of one or more individuals or entities through
a special written agreement. The agreement includes: provisions
for management, ability to assign interests and distribution of
profits and losses. Limited liability companies are permitted to
engage in any lawful, for-profit business or activity other than
banking or insurance. LLC's cannot have more than 35
shareholders.
4. Corporation - A Corporation is a more complex business
structure. As a chartered legal entity, a corporation has
certain rights, privileges and liabilities beyond those of an
individual. Doing business as a corporation may yield tax or
financial benefits, but these can be offset by other
considerations, such as increased licensing fees or decreased
personal control. Corporations may be formed for profit or
nonprofit purposes.
As you can see, each entity is somewhat different. In my
opinion, I would either be a limited liability corporation or
Corporation. There is a little bit more record keeping involved
for a corporation, but is by far, well worth the time and effort
that you expend. I attended to a financial seminar about 15
years ago and I learned that if I could take advantage of every
deduction there was as, just a regular working person, I might
only be eligible for 70 different deductions. If I owned a home
there were a little over a hundred deductions. If I was in
business for myself there were close to 200 available
deductions. Here is where things changed: if I were a
corporation, there were well over 300 deductions!
So, the moral of the story is this; if you can be a corporation,
be a corporation, BUT you absolutely must talk to your
accountant or attorney before you make a determination of which
business entity you should be.
About the author:
Tom Perkins is a business solutions coach and certified personal
trainer who leads fitness professionals to profitability.
Send an email to thecoach1-140208@autocontactor.com to receive
the Essential Business Success Checklist. Or visit his website
at
http://www.fitnessindustrysolutions.com.
