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Creating your entity takes a little planning. It’s never a great thing to rush this process. As a business owner, you need to make sure you consult with the right people so that this task of setting up your entity is done right and it’s easy for you. This post will address a few of the most common entity structures that are common among entrepreneurs.

When you talk with you accountant, legal adviser or entity former make sure you understand what you are asking them to do. If you say that you want a corporation setup then that’s probably what they will do. If you say that you want an entity setup, then it’s a broader question and they will dig deeper to find out which type of entity structure you need.

A few of the benefits of corporations are primarily liability protection and tax savings. Liability protection is important because people are suing everyone these days and if someone slips and falls in your office, they could sue you for it. If you don’t have a properly structured entity in place, they could come after your personal assets instead of just the business assets. Tax savings is also a huge benefit

All states recognize the Limited Liability Company as a legal business entity. These entities are very easy to setup and most states have online portals to file them yourself. If you are unsure how to go about filing it, consult with a tax accountant or attorney and they will complete these steps for you.

If you do nothing but get a business license, you are essentially a sole proprietor. Sole proprietorship don’t have to apply for a nation employer identification number and most of the time can just use their personal social security number as their recognizable ID. When it comes to taxes, the return for a sole prop business is schedule C of the 1040. This is found on your personal tax returns. It’s easy to start a business and it you don’t have the money to file another type of entity, just do this.

Giving away equity in your business is a good route to take if you are looking at outside capital partners. As a sole prop, you can’t split up equity since you represent the business. Corps and LLCs allow for multiple owners so these are great vehicles for raising money.

What is an Operating Agreement? Do you need to learn how to incorporate yourself? Find answers with us!

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