Companies can choose from many different business structures, and the best potential business structure for a company depends on various factors. There are so many different options – and each one will have different implications for business success. But which one is right for your business? And how do you get started on the registration process? Below, Sweet Honeycode breaks it all down below.
Business Structure Options
Let’s start with the basics – what kinds of possible business structure options are out there? And what are their pros and cons? Every country, province, or State may have different business structures or terminology. With that in mind, let’s look at options available in the US to give you a baseline of what to look for in your region:
Sole Proprietorship
A sole proprietorship is a business owned and operated by one person. According to the IRS, the owner of a sole proprietorship has complete control over the company, and all of the profits and losses from the business are passed through to the owner on their personal tax return. Thus, this option is considered the simplest and most common type of business structure out there.
LLC
A limited liability company (LLC) is a business structure that offers its owners increased liability protection. LLCs are an excellent option for small businesses, as they have many advantages for newbie entrepreneurs. Forming an LLC will help you protect your personal assets while benefiting from reduced paperwork and increased tax advantages.
Corporation
A corporation is a business structure that offers its owners limited liability protection and the ability to raise capital by selling shares of stock. Corporations can be either C corporations or S corporations. C corporations are subject to double taxation, which means that the corporation pays taxes on its profits, and then the shareholders pay taxes on the dividends they receive from the corporation. S corporations are not subject to double taxation, which means that the corporation does not pay taxes on its profits, and the shareholders only pay taxes on the dividends they receive from the corporation. If you want to learn more, check out this resource to help you choose whether to go with an S Corp or LLC.
Registering Your Business
There are many reasons to register your business. Perhaps you want to legitimize your business in the eyes of potential customers, vendors, or business partners, or you’re required to register by law to obtain a business license or permit. Whatever your reasons, the process of recording your business is relatively simple.
- Choose the proper business structure: The first step in registering your business is to choose the appropriate business structure. Will you operate as a sole proprietor, partnership, limited liability company (LLC), or corporation? Each type of business has its own advantages and disadvantages, so choosing the one that best suits your needs is essential.
- Select a business name: Once you’ve decided on the business structure, you need to choose a name. Your name will be used on all your business documents, so make sure you choose something you’re happy with.
- Register your business with the government: The next step is registering your business with the appropriate government agencies. This will vary depending on your business structure and location. Still, you may need to register with the IRS, your state government, and/or your local government. Check out this resource by the Small Business Administration to learn more about the process.
- Obtain the necessary licenses and permits: Depending on your business, you may need to obtain specific licenses and permits. For example, you’ll need a food license if you’re selling food products.
Ready to get your business structure set up? Think of your structure as the foundation for your company – the sooner you set it up, the more easily everything else will flow around it. Be sure to consider all your options carefully – you’ve got this!
If you’re looking for more resource guides, check out the Sweet Honeycode site for more informative articles and content!
Article written by Jason Warren at https://businessbeginings.com/
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