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Whether you are a seasoned entrepreneur or embarking on the journey of creating a commercial enterprise for the first time, starting a business is an exciting and rewarding experience. But to make the process as effective and stress-free as possible, you’ll need to carefully plan things out in advance. Mistakes and missteps in the earliest stages of your new business’s life can lead to legal headaches, financial turmoil, and unexpected consequences for your personal life down the road.
To avoid these potential outcomes, the experienced business law attorneys at Schneiders & Associates, LLP, have compiled this guide to help you understand the most important factors to consider as you start a new business.
Choosing a Business Form
Choosing the right business structure is one of your first and most crucial decisions. The most common options are sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Each has advantages and disadvantages regarding liability protection, tax treatment, and management complexity.
For many new businesses, an LLC offers an attractive balance of simplicity and protection. Unlike a sole proprietorship or partnership, an LLC provides a degree of separation between your personal assets and your business liabilities. It is worth noting, however, that forming an LLC requires more paperwork and fees than a sole proprietorship.
Corporations provide even greater liability protection and can be a good choice for businesses seeking outside investment. They also come with more complex tax and reporting requirements.
Deciding on an S-Corp or a C-Corp
If you choose a corporate structure, you must decide between an S-corp and a C-corp. C-corps are taxed separately from their owners, sometimes resulting in “double taxation.” S-corps are “pass-through” entities, with profits and losses flowing to shareholders’ personal tax returns. Ownership restrictions and other factors also differ.
C corporations are the most common type of corporate tax status. They allow for the issuance of multiple classes of stock, which can appeal to venture capitalists and other investors. Additionally, a C corp enjoys perpetual existence, meaning the corporation can continue operating independently of changes in ownership or management.
Incorporating as an S corporation, on the other hand, allows business owners to avoid double taxation by passing corporate income, losses, deductions, and credits directly to shareholders. Additionally, it offers liability protection, shielding personal assets from business debts and claims.
Consult with a business law professional to determine the best fit.
Securing an Entity Name and a Tax ID Number
Choosing a unique, marketable business name is vital. You must typically register your name with the state and obtain a federal Employer Identification Number (EIN) for tax purposes. The process is straightforward, and the attorneys at Schneiders & Associates, LLP can guide you.
Registering with the Secretary of State
To ensure compliance with regulations on workers’ compensation, unemployment insurance, taxes, and more, you must register your business with the Secretary of State in each state where you operate. This is a crucial step to access resources and avoid legal issues down the line.
Obtaining Necessary Licenses and Permits
Depending on your industry and location, you may need various licenses and permits to operate legally. These could include health department approvals, professional licenses, sales tax permits, and more. Working with a skilled business law firm can help ensure your bases are covered.
Contact Schneiders & Associates, LLP Today
Anyone starting a new business should understand that they are about to embark on an exciting journey. They should also know that being a business owner comes with significant responsibility. Working with an experienced and skilled business law attorney can help you take the steps necessary to maximize your business’s chances of success while protecting yourself and your interests.
The seasoned lawyers at Schneiders & Associates, LLP have more than 100 years of combined legal experience. Let us use our knowledge and skills to help you start your business off on the right foot. Contact us today for a consultation.