Set up your business structure: do it yourself

Date: 2015-10-07; view: 358.

TEXT 3 (Unit 2)

Starting a business can change your financial status. There are tax implications and legal implications. One frequently asked question when starting a business is whether you can incorporate the business yourself or whether you need a lawyer. As a general rule, unless you have experience in the legal aspects of business start-ups, it's wise to consult with both an accountant and a lawyer.

A licensed professional can help you evaluate which corporate form of business is right for your new venture. They will review your tax situation with you and help you synchronize your short-term and long-term business objectives in a way that lets you maximize the benefit of business ownership.

Nonetheless, some folks prefer to move forward without the benefit of counsel. They may not have the resources available to hire counsel, or they simply prefer to assume the risk on their own. If you happen to be one of those people, you're in luck because there are some resources you can take advantage of to make your job easier.

The first thing you'll need to do is determine what state filing requirements there may be for the specific corporate form you wish to adopt. Check with the Office of Secretary of State in the state where you wish to incorporate. They'll be happy to direct you to online resources and/or send you a package of materials, including a checklist of what's required. The second thing you'll need to do is figuring out what local filing requirements there may be for your corporation because even though the state filings create the corporation, you haven't met all of the legal requirements until the local license and permit requirements have been satisfied.

There are also online service companies that, for a fee, will handle the state level filing requirements associated with operating under your fictitious (“Doing Business As”) name as well as help form limited liability companies, S corporations, C corporations, and partnerships. They each have several packages to choose from.

Compare the offerings carefully. Some will even help obtain your Employer Identification Number (EIN) from the Internal Revenue Service for a small fee. An EIN is to a business what your social security number is to you. It's a federal tax identification number. Applying for the number can be done online in a matter of minutes for free. You can find everything you need by going directly to the IRS Web site.

Setting up your business properly helps avoid penalties or fines. It can also avoid the liability exposure of your personal assets. Don't be afraid to ask questions when gathering information from government offices. Remember, these offices are here to help you. They want you to be successful because it makes their job easier. If you fully disclose your plans, they will help you find the right information. Withholding material information can backfire. You don't, for example, want to find yourself trying to claim business losses on your tax return and the government saying, “Business, what business?”

Ultimately, the decision of whether you go it alone and follow the ten steps to forming a corporation, purchase a package from a service company, or independently hire a lawyer, is a trade-off between time, money, and peace of mind. A new entrepreneur wears many hats. What hats you keep and what hats you successfully outsource are up to you.

(http.//smallbusiness.com/company-activities-management/company-structures/12327864-1.html)

(29 March.2010)