When does the business start? “Think and Grow Rich” Napoleon Hill purposely left out a key component in the pursuit of success. The title could have been “Think, Take Action and Grow Rich” because that’s all you really need to do, take action. Once you take action and consummate a transaction, you are technically “in business”. The “action” you take could be as simple as setting up an affiliate account on Amazon. Once in business you can start taking business deductions. I will take you through what you can and can’t deduct in lesson 5 Benefits of Business Ownership.
Once you are officially in business it’s important to choose the best legal structure for your business. There are 6 main legal structures in which you can operate a small business:
- Sole Proprietor
- “S” Corporation
- LLC-Limited Liability Company
- LLP-Limited Liability Partnership
WARNING WARNING WARNING
Business owners must first assess their current tax situation in order to properly choose the best operating entity. Most of the time a new, single owner business should conduct business as an S-Corp but that does not mean that everyone should start from day one as an S-Corp. Choosing an entity must be done with the aid of a tax professional that is proficient in tax planning.
Incorporating: You must incorporate in the state you do business in. If you do business in more than one state you may have to be registered and authorized to do business in those states. The issue is something called Nexus and has to do with your physical presence and/or activities in those states. The internet has created some interesting challenges when it comes to determining Nexus and only an examination of the state laws and administrative processes will determine if you need to register in that state. You would be considered a “Foreign Corp” or “Foreign Entity” Meaning that you were originally formed in the company’s home state. The registration is done with the Secretary of State of the state. You may need to file a corporate return, payroll and sales tax returns. Because of the internet, this is still an evolving issue. There are Billions of dollars in state taxes to consider. Proceed with caution when you do business in multiple states.
What about Incorporating Delaware, Nevada, Texas…You can do that but you still have to register in the state your physically located in making this a non-issue. It does not make sense to incorporate in a state like Delaware unless you plan on being a business in multiple states and you want additional legal protection in a state that is pro-business.
Business Name: I’ve seen people become paralyzed when it comes to choosing a business name, sometimes to the point where they put off launching. The business name is important but it should impede progress and the reason is simple. An unincorporated businesses can use a D/B/A (Doing business as) which usually only requires a small fee and a trip to the county clerk while corporations and LLCs can apply for a Certificate of Assumed Name (or your states terminology). So XYZ Corp can do business as Anything Corp. You just have to pay a fee and register with your secretary of state.
Registered Agent: A Registered agent (a/k/a Resident Agent or Statutory Agent) is an individual or business designated to receive legal documents on behalf of the business. In the case of a lawsuit involving the business, the registered agent is designated to receive service of process (SOP). The state may also send paperwork to the registered agent for periodic corporate registration, if needed. The registered agent must be physically located in the state(s) you are registered to do business in.
You can be your own registered agent or you can actually hire someone to be the businesses Registered agent. It’s extremely important that you make sure you have the correct, current address registered with your Secretary of State. All Registered Agents and Incorporators can be found on the Secretary of State website you can find here.
Incorporator: an agent (an individual or business entity) that files and signs the Articles of Incorporation with the Secretary of State you’re doing business in. The incorporator may also select the board of directors and organize the initial meeting of the board.
NOTE: It’s extremely important to operate your business according to Federal and state guidelines. You are operating a separate legal entity and it always advisable to consult with an attorney on legal matters, including your legal structure and where your business is organized.
|Joe DiChiara CPA offers Small Business Advisory Services to passionate entrepreneurs that want to Start, Build and Manage a small business successfully. He enjoys being an “Out of The Box Thinker” and has helped thousands of small business owners start, build and manage their own business. In 2009 Joe discovered a new approach to business through “The Science of Getting Rich” written by Wallace Wattles and the inspiration behind the movie “The Secret”.
After successfully applying the SOGR principles as well as Napoleon Hill’s “Think And Grow Rich” to his own business, Joe discovered that there is a large market segment that is being overtaxed, unprotected and unfairly targeted by IRS. Every year over 3,000,000 entrepreneurs start businesses unaware of the dangers of operating as a sole proprietor with over 25,000,000 in the process of going bankrupt. This discovery inspired Joe to develop programs, tools, and resources to help stem the tide of these avoidable small business failures.
Currently, Joe is building an online school for small business owners www.bedrockbusinessbuildersuniversity.com and www.taxauditsmackdown.com which will help entrepreneurs create the books and records needed to survive any tax audit.
Joe is a #1 Amazon Best-Selling Author and you can Check Out Joe’s Books on Amazon by clicking here!
Do you have great business ideas but don’t know exactly where to start? Book a free 30 minute chat with me. All you have to do is CLICK HERE NOW!