Are you finally ready to start your own business? If so, it’s important to make sure you take the right steps.
Starting a company isn’t easy, but if you learn what you need to know about business entities and establishing the legal structure of your business, you can avoid making expensive mistakes. Two of the most important aspects of starting a business is choosing the right business structure and ensuring that the name of your business isn’t already taken.
Choose the Right Entity
As you probably know, Roth Fioretti – Chicago Business Attorney says starting a business isn’t simply putting up a website and selling your products or services. There are legal steps you have to take to make sure that your company is registered with your state and county.
This means you have to choose the right type of business structure so you can register your company the right way. Each type has its advantages and disadvantages.
Limited Liability Company (LLC)
An LLC is an entity that is filed at the state level through the Montana Secretary of State. An LLC allows you to identify your business as a legal entity that is separate from you, the owner. This separation provides you with personal liability protection — mean that you would not be personally responsible for any debts or liabilities incurred by the organization.
Simply put, if someone were to file a lawsuit against your company, they would not be able to come after your assets. They would only be able to file claims against assets owned by the business.
LLC’s are typically taxed as a “pass-through entity,” which means that any taxes will pass through the LLC and go directly to the owner’s tax return.
Corporations are like LLCs in that they provide personal liability protection for its owners. However, it is different in the formalities with which they must comply.
Unlike an LLC, a corporation is usually required to hold annual meetings, where the owners would document the proceedings by keeping minutes. Any major changes to the business structure must be properly documented.
Additionally, corporations can be taxed differently that LLC’s. There are two different types of corporations: the s-corporation and the c-corporation. You will want to understand the difference between the two before filing your business.
Sole Proprietorship/General Partnership
A sole proprietorship (if there is one owner) or general partnership (if there is more than one owner) is business filing that is done at the county level. It is the simplest type of business filing, and it allows a person to do business under a different name.
These types of businesses are created by filing a DBA (doing business as) with your local county office. It’s typically less expensive to file your business as a DBA, but one key difference between this type filing and state-filed entities is that it does not provide personal liability protection. You would be personally responsible for any debts or liabilities that your company amasses.
Conduct A Name Search
Before filing your business, it’s best to ensure that you are not using a name that is too similar to another business. If the name you have chosen is too close to another company’s, you run the risk of having your filing rejected or even worse — being sued by another business.
If you’re filing a business in Minnesota, you need to run a search of the Secretary of State’s database to make sure that you are not infringing on someone else’s intellectual property. It’s a pretty easy process. Just visit the Secretary of State’s entity name search and type in the name you are considering using.
Starting a business can be an exciting process, but it is also a challenge. Make sure that you are getting your company started off on the right foot so you can steer clear of any issues.