Business Legalities: Getting Off to a Good Start
You must tend to the Business Legalities when starting your own home based business.
It’s very important for every entrepreneur to get their business set up legally from the start. It’s not difficult to create a home based businesses but there are a few steps you will want to follow to be sure you have everything filed legally with your local and state governments as well as the IRS.
Here are some Steps to Follow when starting a Virtual Assistant Business…
- Decide on a name for your business and check to make sure it is available. You can easily do a trade name search online United States Patent and Trademark Office. When you have your name you will need to register it with your state government.
- Be sure to do a domain name check as well. You want to make sure you can use your business name for your website. GoDaddy has a great search tool to check domain name availability.
- You need to find out if there are any special licenses required in your city and state for your business. All states have websites now and most provide plenty of information and allow you to file most of your paperwork conveniently online.
- Next you need to decide the legal structure of your business and how you will be taxed. The three basic business structures are sole proprietor, corporation, and LLC.
Each business structure has its advantages and disadvantages and is taxed differently by the IRS.
Here is a basic description of each:
- Sole Proprietor: is a type of business entity which legally has no separate existence from its owner. All debts of the business are debts of the owner and creditors can come after your personal assets. This is the easiest form of business to set up and maintain. Since the sole proprietorship and its owner are one and the same, this means a sole proprietor reports all business income or losses on his or her individual income tax return.
- Corporation: A corporation is a legal entity separate from the persons that form it. This provides the officers of the corporation protection from personal liability. If a corporation fails, shareholders only stand to lose their investment but are not liable for debts that remain owing to the corporation’s creditors. This is the most complicated business structure to create and maintain, and is taxed as a corporation.
- Limited Liability Company (LLC):This is a hybrid business entity with characteristics of both a corporation and a partnership. The owners have limited liability for the actions and debts of the company similar to a corporation, but it is much simpler to setup and maintain, making it suitable for smaller companies with a single owner. An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation.
Which Business Structure is Best?
One advantage to forming a LLC structure over sole proprietorshipis the personal liability protection. It is very easy and cost effective to create you own corporation online these days. If you can afford the fees, you can hire a lawyer to set up your corporation for you. If you cannot afford the lawyer fees, you can consult with a lawyer and do the set up yourself. Many software programs today make it easier than ever to incorporate your own business.
Everyone’s business is different. I know plenty of Virtual Assistant who are quite happy with the sole proprietor structure, and a few who have corporations.
I cannot advise you as to which legal structure is right for you and encourage you to seek professional advice for your situation. I have paid for legal consultations in the past and then did the work setting up my business legal structure and bookkeeping myself. Never hesitate to get expert help for your business legalities.