With the economy in a down turn and people looking for financial stability it comes as no surprise that many are opting to start a small business. Most businesses can fall under one of three categories; sole proprietorship, LLC or Corporation. Finding out what is the ideal one for your needs is the first step.
Simply put, this means that one person owns the company, completely. You will find that when it comes to you and your company, there is no distinction between the two. This means that you are responsible for all the finances, risks and benefits of the company.
Easy to set up, sole proprietorships can be run under your name or as a DBA – doing business as – which allows you to chose a name for the company for the purposes of bank accounts and the like. You pay self employment tax rather than corporate taxes, and you have little to no paperwork to file.
On the down side, you may experience difficulty raising capital and you are fully responsible for any debts the business accrues. As your business becomes more successful you should seriously consider becoming an LLC or Corporation.
Limited Liability Company – LLC
This kind of business is a mix of a partnership feature and corporate structure. More flexible in nature instead of a corporation, it is suitable for a small, or one person business. You can decide how you want to pay your taxes, as well as avoiding double taxation and dividend taxes. Not only that, but you are protected as a person from any likely debt the business builds on, in addition to there is less paperwork involved that is generally found with corporations.
Because LLCs are still relatively new, many creditors will require you, the person, to back up any loans made to the business. This means that you lose the benefit of creating a company to protect yourself from debts. Some states consider LLCs taxable, again, reducing the benefits of pass through taxation usually associated with this legal status, making subject to double taxation. Renewal fees are often higher than those charged Sole proprietorships. Investigate the laws regarding LLCs in your state before you go with this option.
S-Corp for Small Business
A corporation is a legal entity in and of itself. It has both privileges and liabilities that are completely separate from its members. There are many different types of corporations, but for small business owners, S-Corps are the most common corporation for a small venture that involves several people.
An S-Corp doesn’t pay taxes on its income. The corporation’s profits and losses are passed down to its shareholders and they must report their earnings on their annual taxes. This provides a level of liability protection to the owners and members from creditors.
Like other corporations you will need to have stock, file certain paperwork and run regular meetings and officer elections.
Protecting your Assets
No matter what kind of business you run, or which legal status you choose, being able to protect your assets is important. If you end up spending any time meeting clients, traveling or interacting with people you don’t know, you need to watch out for your self defense.
A stun gun is an ideal non-lethal option. Do you know where you will find the best place to buy stun gun? Online. Take a look at the options and select a weapon you feel comfortable with. You will be able to go anywhere with confidence.