When you're starting a business, one of the first decisions you'll have to make is what type of business entity to establish. This decision can have significant tax and personal liability implications, so it's important to choose carefully. The most common business structures are sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Today, Superior Effect Marketing shares some important info you need to know before selecting a structure for your upcoming business.
Business Structures for Entrepreneurs
While there are several types of business entities you can choose from, these are four of the most common for emerging entrepreneurs:
● Sole Proprietorship: A sole proprietorship is the simplest and most common type of business structure. It's an unincorporated business owned and operated by one person with no distinction between the business and the owner. The owner has complete control over all aspects of the business and is personally liable for all debts and obligations taken on by the business.
● Partnership: A partnership is an unincorporated business owned and operated by two or more people. Partnerships can be either general or limited. In a general partnership, all partners are equally liable for the debts and obligations of the business. In a limited partnership, there is at least one general partner who is liable for the debts and obligations of the business, while the other partners are only liable up to the amount of their investment. Limited partnerships are often used by businesses that need to raise capital from investors.
● Limited Liability Company (LLC): An LLC is a hybrid legal entity that combines features of both a corporation and a partnership. Like a corporation, an LLC offers its owners limited liability protection from debts and obligations incurred by the business. Like a partnership, an LLC has pass-through taxation, meaning that profits and losses are "passed through" to the owners' personal income tax returns. LLCs can be owned by one or more individuals, corporations, other LLCs, or foreign entities. Before registering, it’s crucial to learn the ins and outs of C Corp vs LLC to ensure that you have sufficient liability shielding.
● Corporation: A corporation is a legal entity that is separate and distinct from its owners. Corporations are owned by shareholders and managed by a board of directors. Shareholders elect directors to oversee the management of the corporation and make major decisions on behalf of the company. Corporations offer their shareholders limited liability protection from debts and obligations of the business. Profits earned by the corporation are subject to corporate income tax, while dividends paid to shareholders are subject to personal income tax.
Considerations for Picking a Structure
When choosing a business structure, there are several factors you should take into account, including:
● Liability protection: How much personal liability are you willing to assume?
● Taxation: How will your business be taxed?
● Formality: How formal do you want your business operations to be?
● Ownership: Who will own your business?
● Location: Where will your business be located?
● Duration: How long do you plan on being in business?
Registering Your Business
Once you've chosen a business structure, you'll need to register your business with your state government. You can do this online or in person at your local Secretary of State office. The process typically takes less than an hour and involves filing some paperwork and paying a filing fee. Once your registration is complete, you'll be issued an identification number that you'll use when filing your taxes each year. You may also need to obtain a federal Employer Identification Number (EIN) from the IRS if you plan on hiring employees.
Create a Logo
Designing a logo for your brand or business doesn't have to be time-consuming or expensive. Thanks to a range of online tools available today, you can create a professional and visually appealing logo for free within minutes. Online tools provide a wide array of templates, fonts, and icons that can be customized to suit your brand's personality and message. By using these tools, you can achieve massive time efficiencies, as they eliminate the need to learn complex design software or hire a professional designer. You can experiment with different designs until you find the one that best represents your brand, all without leaving your web browser.
Once your business is up and running, it's important to stay organized so that you can keep track of your finances and comply with government regulations. There are several software programs available that can help you manage your finances and stay compliant with tax laws.
QuickBooks is one popular option that offers bookkeeping, invoicing, tax preparation, payroll, and other features specifically designed for small businesses. Another option is Xero, which offers similar features but with a focus on online collaboration between businesses and their advisors (e.g., accountant). Regardless of which software program you choose, staying organized will save you time and money in the long run.
Marketing Your New Business
Content marketing can be a cost-effective tactic for marketing your new business. It involves the creation and sharing of online material, such as blogs, social media posts, and videos, that does not explicitly promote a brand but is intended to stimulate interest in its products or services. This approach can be significantly less expensive than traditional advertising channels, while often providing a higher return on investment. By consistently delivering valuable information to potential customers, you can build trust and brand loyalty, which can lead to increased sales over time. Furthermore, content marketing can also improve your search engine rankings, making your business more visible to potential customers online.
For more hands-on marketing help, contact Superior Effect Marketing today!
Think Before Choosing
Choosing the right business structure for your startup is an important decision. There are several factors to consider, including liability protection, taxation, formality, ownership, location, and duration. Once you've chosen a structure, you'll need to register your business with your state government. And finally, once your business is up and running, it's important to stay organized so that you can keep track of your finances and comply with government regulations.
Summer and her team have years of experience in all realms of marketing. Her favorite is Search Engine Optimization and trying to figure out what Google is up to next.