Starting a business can be stressful when you don’t have all the facts. The most important thing to consider is what type of business you would like to create. It is vital to understand the different types of businesses because you will have to file different forms with your local and state governments based on what type you start.
How Should My Business Incorporate?
There are six basic types of businesses: sole proprietorships, cooperatives, corporations, limited liability companies, partnerships, and S corporations. Each type comes with their own benefits and drawbacks:
- Sole Proprietorship is owned and run by one individual in which there is no legal distinction between the owner and the business.
- A cooperative is a simple company that is formed when multiple people go into business together.
- Corporations are more complicated and are generally larger, well-established companies.
- Limited liability companies, or LLCs, offer the liability protection of a corporation and the simple taxes of a cooperative.
- Partnerships can be structured in a variety of ways but generally involve two people or entities.
- S corporations are similar to regular corporations, but the business owner is taxed on a personal level.
Why Is It Important to Incorporate?
Incorporating your business is a personal choice, but forming a corporation or LLC protects business owners and offers tax flexibility that a sole proprietorship does not. Personal asset protection is one of the biggest reasons incorporating is attractive to business owners. With a sole proprietorship, if the business owner is sued, any personal assets can be seized in litigation.
Do I Need to Register a Business Name?
Your business name is perhaps one of the most important things to consider when you start a company. However, if you choose anything but your own name, you will have to make sure to register properly. Your "Doing Business As," or DBA, is any business name that is not your own given name or the name of your partner, if you have one. Not all states require you to register a DBA, but in states that do, there are some instances where one is very important: sole proprietorships, partnerships, existing corporations, and existing LLCs. If you have already set up a company under your own name, you must register a DBA in order to use any other name. Registering a "Doing Business As" name is as simple as visiting your county clerk or state government offices.
How Do I Register My Business?
There are a variety of licenses and permits required to run a business. The type you will need varies based on where you are located and what type of business you start. You may need licenses and permits at the federal, state, county, and city level. If your business is a sole proprietorship, for example, you are not required to register your business at the state level, but must do so locally. Some states, however, require that you use your own name instead of a DBA unless you file at the state level. Corporations, non-profit organizations, LLCs, and partnerships always require registration at the state level in order to do business.
