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SO YOU WANT TO OPEN A BUSINESS The following article is not meant to be "all encompassing" information, it is a general overview of some very important FIRST steps in operating a successful business. Allow me to introduce to you what business is...and what it isn't: YOU are not your business. You may love your business, you may feel that you spend more time with your business than with your family, your business may even supply you with "your purpose" in life; but, your business SHOULD not be closely connected with you on a legal level. YOU CAN EASILY BE THE CEO OF YOUR OWN LLC OR CORPORATION!! Yes, you can open a small business(either brick and morter or Internet) but either way, you should be ALERTED as to what type of business structure is best for you and provides the most advantages for you and your business. Too many people think that having a sole proprietorship (a business in your name only) is simple and fine for them.... IT IS NOT! EVER!!!! THERE IS NO PROTECTION, (EVEN IF YOU HAVE INSURANCE) AGAINST EXTREME LOSS OF EVERYTHING YOU OWN...And let us not forget our old friend, the I.R.S... So, what IS out there for you???What business structure exists that is simple yet gives YOU, the Small Business Owner, advantages given to Huge Corporations? A LIMITED LIABILITY COMPANY It is commonly called LLC. Now, this isn't the answer for everybody, but for most, it is an ideal solution. An LLC offers YOU the protection of your PERSONAL ASSETS from loss and has many tax advangages as well. You see, as a sole propietor, you have to try and find every deduction possible to minimize tax, and, even then, it is often not enough.The I.R.S. has a new tax called self employment tax that is a double hit for all sole proprietors (that's a tax ON TOP OF INCOME TAX!). An LLC eliminates that because all taxes pass through an ENTITY separate from yourself. The money you make is taxable, but not at nearly the same rate nor amount as a sole proprietorship (or partnership for that matter) You say, "Well, I have a partner to go in with me and he/she wants a general partnership." I say that such a business structure is the 2ND WORST TO HAVE! So,the sole proprietor tax is split in two, and two people can lose their ASSETS..If you have a partner,an LLC would still be GREAT for as many partners as you have or want.. There are other business structures outside of LLC, of course. A small business that wants to grow, should carefully choose at the beginning, which structure is best for NOW AND the FUTURE. To follow is a general overview of what they are: 1. There is the most common structure called the "C" Corporation...Many small business owners shy away from this one simply due to the constant upkeep of corporate minutes and the possibility of the "double taxation" that many "C" corporations have to deal with should they 1) post a profit and 2) Have shareholders in which they give dividends to.... The tax ratio for this structure is about 33% of profits(for the corporation itself) and then if you claim a salary, you get taxed on that (unless you have learned to invest most of your salary before your fiscal tax year ends) or you have made little enough to which after deductions, you have nothing to pay. The other problem, if you will, is YOU are not in absolute control over your business. You have a board of directors to answer to. Aside from these few points (which are easy enough to work around), a "C" corporation is a pretty sweet structure to have for easier corporate financing. A "C" Corp., is the structure that most investors and banks want to see before they fund a business. A bank would have to be a "member" of an LLC before they can fund, something they don't really want to do. 2. Next up is the "S" corporation...This type of corporation, like the "C" corporation, can have shareholders (more on that at another time), but no foreign ones..It has limits in terms of operations but has the tax advantage that a "C" corporation lacks..No double taxation. The taxes are "pass through" taxes, like a "Limited Partnership" (a structure in which both partners are not taxed individually). The organization's share holders do not get taxed on dividends. However, even tho' this may all seem great, the big downside to the "S" corporation structure is huge limitations in both the operations and funding options you are "allowed" to perform and take part in. In my opinion, an "S" structure should only be considered if you are a Non-Profit, operated in the U.S. ONLY. Now, all this may seem complicated, and in some ways is, This is why alot of thought has to go into a business structure.... I will give you some basic pros and cons to each structure to help you out here. | | LLC | "C" corp | "S" corp | Limited Partnership | | TAXES | Goes through business, owners have to pay taxes on profits | Business has to pay taxes on profits.Shareholders pay taxes on dividends | Business pays taxes on profits through it's "partners" | Partners pay taxes on profits. | | SHAREHOLDERS | NO, Members | YES | YES | NO | | Property ownership | YES | NO | NO | YES | | Board of Directors | NO | YES | YES | NO |
An important side note: A business that will SOMEDAY OWN REALESTATE, a "C" corp. will not be the best structure because the VALUE of the ASSET will have to be divided up between the Shareholders.Which is VERY PAINFUL should the Corporation have to liquidate the real estate. An, LLC is perfect for such a thing. NOW, LET US DISCUSS COMPANY OR CORPORATE PROTECTION. There is a legal process called "PIERCING THE CORPORATE VEIL" that allows a Lawyer, during a lawsuit, to be able to go after your personal ASSETS should the Corporation not have the funds to satisfy the suit.....Obviously, the protection of your personal assets is one of the MAIN reasons you incorporated in the first place! So, the final step in determining how to set up your business is to decide WHERE to set up your business. At least on paper. TWO STATES OFFER THE BEST PROTECTION AGAINST THE PIERCING OF THE VEIL!!! NEVADA AND DELAWARE!!! 1st rule of thumb, DO NOT INCORPORATE IN YOUR HOME STATE (unless it is either of the two mentioned above)...YOUR STATE WILL NOT PROTECT YOU, NOR YOUR CORPORATION AGAINST LEGAL ACTIONS THAT ATTEMPT TO STRIP YOU OF THE PROTECTIONS NORMALLY AFFORDED YOU AS A CORPORATE ENTITY. You can operate in your homestate as a Foreign Corporation and do business as such. But the protection that Nevada and Delaware offer are well worth the extra 100 to 200 dollars needed to register as a foreign corporation in your home state. Now, maybe you need a lawyer for this OR maybe you need the help of a "trusted advisor" (which costs less because they are not lawyers, they just know the business). Below is a LAWYER that has publication for sale at a reasonable price for all NEW BUSINESS OWNERS! 
MIKE YOUNG IS AN INTERNET BUSINESS LAWYER WHO ALSO PROVIDES PERSONAL SERVICES TO NEW INTERNET ENTREPENEURS! HIS SERVICES RANGE FROM GUIDENCE TO INCORPORATION SERVICES. ONE OF HIS FOUNDING BELIEFS ARE A good business lawyer adds value to the clients he represents.
How?
By building relationships with clients that make or save the clients money.
I HAVE ALSO FOUND A PLACE WHERE YOU CAN INCORPORATE FOR A REASONABLE PRICE. These people have forms, assistance and other services for incorporation 
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