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The first step to building a successful business is registering it with the state. We make this process easy, helping you choose the right structure and file all necessary documents. We provide business consultation and recommendations for legal and marketing services.
Choose a name that's unique, informative, memorable, available, and good for SEO.
Don't just assume that you should be an LLC. Consider your options and pick the right one.
If you're doing the business with another person, have a written agreement (partnership or operating) before starting.
You need to register in every state where you'll be operating. Then report business ownership to FinCEN.
Apply for a federal and state tax ID. Make sure to register for the right type of tax. If you'll have employees, don't forget an unemployment insurance tax ID.
If your industry requires licensing, obtain all the licenses, including state and local, and make sure you are compliant with all regulations.
Depending on the industry, you may need to register with other government agencies such as the department of transportation, labor, agriculture, alcohol and tobacco, and so on.
You are in business if you sell any services or products even if you never register your business. You are still subject to all the same rules and must report and pay tax on income, sales, and payroll. You have no liability protection and can only operate under your personal name.
If you want to do business under a different name, then you can file an Assumed Name with the secretary of state. This will allow you to do business under a different name but will not provide you with any liability protection or favorable tax treatment.
Pros: little to no paperwork
Cons: no liability protection, difficulty in opening bank accounts and paying taxes
A limited liability company is a hybrid between a corporation and an assumed name / partnership in that you get the liability protection of a corporation and the pass-through tax treatment of an assumed name / partnership.
What does that mean? It means that you are not personally responsible for paying the company's debts or judgments unless you co-sign or are found personally liable in court. Your personal property and wealth is protected from creditors, but be careful, this protection can be eroded if you co-mingle personal and business funds.
As for taxes, the business does not pay income tax. Instead, the owners pay income and self-employment (SE) tax on their share of the profits. A passive member in a multi-member LLC may be able to avoid the additional SE tax.
Pros: liability protection, no double taxation, simple governance
Cons: cumbersome to report the purchase or sale of an LLC, sale of LLC can be taxed unfavorably
A partnership is similar to a multi-member LLC in that the income passes through to the owners and is taxed on the owners' individual tax returns instead of at the corporate level. Unlike an LLC, the partners do not have liability protection and can be personally sued and collected on for partnership debt and judgments.
A partnership can only exist between specific individuals. Unless specified otherwise in a partnership agreement, each time a partner leaves or dies, the partnership ends and a new one must be formed for the remaining partners to continue operating the business.
Pros: no double taxation
Cons: a lot of paperwork, no liability protection, self-employment tax
A corporation is separate from its owners. It has its own income tax obligation. Any distributions from the corporation to owners cannot be deducted so the payments are taxed twice: at the corporate level and the individual level. Owners are not personally liable for corporate debt or law suits. The corporation can go public and have as many shareholders as needed. It is also more regulated than other business structures.
Pros: easier and more tax favorable to sell shares in the company, liability protection, possibly lower tax rate depending on the owner's other source of income, no self-employment tax
Cons: double taxation, higher regulation and compliance, more scrutiny
If you are in business with another person, it is imperative to get a legal agreement. Don't know a business attorney? We recommend our partners at NeoEra Legal.
You can certainly handle all the paperwork on your own. Most registrations and licensing are done online, but make sure you register everything correctly to avoid problems down the road.
We are experienced in registering various types of businesses across most industries. We are meticulous and careful when filing the applications.
