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Opening a Business

Opening a business can bring a very rewarding financial outcome and when successful, it can lead to a great sense of personal accomplishment.  In order to achieve success, a business must be properly managed from the inception.  Before the business is even established, a well organized business plan must be prepared and that includes choosing the right business structure. Selecting the right type of company for your new business helps maximize your chances of financial success, making sure your business plan is properly executed.

Do these situations apply to you and your business? Find a local financial professional in your area who can help.

According to the Small Business Administration, the most popular types of business entities are corporations, LLCs, and partnerships.  When starting a business, an important decision you have to make is the type of business entity. This decision is important, because the type of business you create determines the liability implications for personal investments as well as the taxes. It’s important to understand each business type and select the one that is the best fit with the business plan.

When opening a new business, the following are just a few areas in which you may need consulting services:

  • Corporations
  • LLC / LLP
  • Partnerships
  • Not-for-Profit
  • Venture Capital
  • Creating a Business Plan
A corporation is an independent legal entity owned by shareholders. The corporation is held legally responsible for the actions and debts acquired by the business.  Corporations are more complicated than other business structures and have more tax and legal requirements. Corporations work best for larger companies that are already established, not necessarily startups.  Forming a corporation varies by state and is formed under the laws of the state in which it is registered.  A popular type of corporation is an S Corp, which avoids double taxation by allowing owners to split profits and losses with the business for a lower tax rate.

A limited liability company is a business structure that provides the limited liability features of a corporation and the tax benefits of a partnership.  According to the SBA, the owners of an LLC can be an individual, two or more individuals, other corporations, other LLCs, or other entities.

A partnership is a business entity with two or more owners.  There are three general types of partnership arrangements, General Partnerships, Limited Partnerships, and Joint Ventures.  Normally, each partner contributes money and labor towards the business venture and in return they share the profits and losses of the business.  It is crucial to discuss any pertinent issues and create a legal partnership agreement that states clearly how the business will be operated, how the profits will be divided, and many other important aspects.  Although partnership agreements are not legally required, they are strongly recommended and it is considered extremely risky to operate without one.

To register your business as a corporation, you will need to file articles of incorporation with the state the corporation is being opened in.  In some states, corporations must establish directors and issue stock certificates to shareholders. Once the business is registered, licenses and permits must be obtained and the regulations vary by industry, state and locality. In addition, if you are hiring employees, there are many applicable federal and state regulations that employers must follow.  Businesses will also need to register with the IRS and state and local revenue agencies, and receive a tax ID number or permit.  Contact a local business professional to find out about specific filing requirements in the state where your business will be formed.

Think about the benefits that will be realized for your business when you work with a professional. Contact a local financial planner in your area for assistance with opening a business.