Choosing your business entity

Almost everyone has the dream to start his/her own business, = indeed,=20 there are great rewards in running your own business:

controlling your own time=20
determining your own income=20
being your own boss

So how does one get started? = Well, first=20 of all, you have to determine what kind of business you should = have, or=20 what kind of "business entity" you want to be. For most small = businesses,=20 you should be either an LLC or a corporation. Whether you are just = starting your business or you've been in business for a while, = there are=20 simply too many reasons not to form an entity. The biggest reasons = is=20 limiting your personal liability for business debts and judgments. =

LIMITING LIABILITY

Probably the best reason for forming either an INC or LLC for = your=20 business is to protect your personal assets from business = liability.=20 Generally, your business liability is limited to the assets that = are owned=20 by the INC or LLC. This means that your personal assets (i.e. = home, auto,=20 retirement accounts, etc.) potentially aren't at risk because of = your=20 business debts or liabilities.=20

GENERAL DIFFERENCES

For many small businesses, the simplicity and flexibility of a = LLC may=20 be very compelling. Corporations are required to have initial=20 organizational meetings, annual meetings, adopt bylaws and issue = stock=20 certificates. LLCs do not have these requirements. Instead LLCs = should=20 have, although not required to have, an operating agreement = (possibly a=20 requirement in your state), which spells out who has authority to = do what=20 and how the business will be managed. LLCs, as alluded to earlier, = are=20 given the flexibility to choose to be taxed as a corporation or as = a=20 partnership (or disregarded as an entity for single member LLCs) = by the=20 IRS. Corporations can only choose to be taxed as a C Corporation=20 (standard) or as a Sub S Corporation.

So, why not always form a LLC? Corporations offer some benefits = not=20 available to LLCs. Corporations have, in some states, hundreds of = years of=20 case law behind them where as LLCs have maybe twenty or so years = of case=20 law history. Corporations are generally more accepted as separate = from you=20 as the owner, especially when you are the only owner. For = instance, some=20 banks will lend money to a corporation, but not to a LLC without = the=20 personal guarantee of the owner(s). Generally, investors will not = invest=20 in a business unless it is a corporation as corporations can limit = stock=20 ownership rights based on different classes of stock. If your = business is=20 potentially going to be big, with lots of shareholders, a = corporation may=20 be a better vehicle.

So how to actually get started? The easiest would be to use an = online=20 service. They are quite cheap right now and you can save the = trouble from=20 all the legal hassle and use your time perfecting your business = idea.=20 Usually these services (such as the ones showing up in the ad = section to=20 the right) charges a few hundred dollars - you can save some money = by only=20 ordering the registration part from these websites, along with = maybe a=20 steel seal. You can get an EIN (employer identification number) = and open a=20 bank account yourself with very little effort and at no cost. So = there's=20 really no reason to pay the online services for those.

Theoretically, now you're in business! If you want to have a = web=20 presence, you need to register a web domain and create your = homepage, and=20 maybe add ecommerce capabilities too.

Next=20

Any questions or comments, feel free to email me at admin@bizinfoex.com

Click here to go to = the=20 forum

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