One of the things that many new business structures tend to get hung up on when they start their own business is the legal structure of their company. If, when you start out, your business consists of one single owner, and your business’ main location is within the United States, I strongly recommend that you start out as a sole proprietorship, at least in the beginning. This is most likely the most efficient way for you to conduct business, and it will allow you to get a good foundation established for the future of your company.
When you start a sole proprietorship, there is no actual paperwork for you to fill out, as you are legally not creating a business entity. In regards to the legal world and taxes, you and your business are completely tied together. Because of this fact, sole proprietorships are one of the easiest and quickest ways to form your own company. They are great for individuals who are just getting started in the business world, as they prevent you from having to deal with messy legal issues and complicated taxes that are easy to mess up.
Plus, when you start out as a sole proprietorship, you always have the option of incorporating another legal entity later on in your business career. Once you have a larger income, this is definitely an advantageous route to pursue. But, in the mean time, you should not think about crossing that bridge until you get there.
There are many other additional options that you may want to consider, however. For instance, you can choose to be a non-profit, partnership, corporation, or other type of business as well. If you are unsure of all the technicalities involved with these titles, and you know that you are not particularly savvy with the business world, the best thing that you can choose to do is to set up a meeting with a tax professional who has extensive experience working with small businesses.
One of the biggest factors that should be considered during your decision making process is taxes. You always want to choose whatever route is best for you tax wise, and a tax professional will be able to teach you about this. They will make sure that legally you are good to go, and they will be able to help you alter your legal status if that proves to be necessary. While one legal status may work for a company for quite some time, it may not always be the best option at any given time.
Fortunately, it is possible to change the legal status of a company. Additionally, many individuals decide what legal status they are going to have based off of liability concerns. Liability is another huge factor that you always want to take into consideration, and it is a big determiner for what type of company you will have.
or go back to last chapter:
