Starting a small business requires a lot of know-how. In fact, to bring your successful business concept to life, you must understand the legal requirements that govern liability, taxes, and more. Foster Financial CPA would like to help start on the right path with the following summary of legal requirements for small businesses.
The business structure you determine will impact your liability and tax requirements. Some common business structures include:
Sole Proprietorship
If you don’t register otherwise, your small business will be considered a sole proprietorship by default. One person owns the business and assumes full personal liability.
Partnership
A partnership is a business owned by two or more people who share total personal liability.
Limited Liability Company (LLC)
An LLC removes personal liability from the business owners while allowing business funds to be reported through personal taxes.
Corporations
Corporations are distinct legal entities. All liability is removed from owners and held with the corporation itself. There are also several corporation types with differing structures and tax requirements.
Other business structures exist, and there are many ways that business structures can overlap. In fact, it is best to seek tax and legal advice when starting a small business to ensure your structure offers you all the liability and tax benefits possible.
Unless you are conducting business under your own legal name, you will want to register your business name. In fact, there are several ways to register that will protect you and your brand. Depending on your structure, you can register your entity name, trademark, Doing Business As (DBA) name, or domain name.
Once you have registered your business, you can apply for an Employer Identification Number (EIN) with the IRS. This will allow your business to manage all tax-related matters as a distinct entity.
Depending on the type of business you plan to operate, there will also likely be license or permit requirements to sell goods or services. Check with local, state, as well as federal resources to ensure you will be operating legally.
Different banks will have unique requirements, but you will need your EIN to start a business account. This account will also allow you to keep business finances isolated from other funds and offer protection for you and your customers.
If you are starting a small business and would like more information or have questions about your unique situation, please contact us today. We have the experience and expertise to assist you in this endeavor.
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