If you haven’t already, please read the introduction to this series!
Now, I realize that covering business structures might seem an unorthodox place to begin, but you’re just going to have to trust that there’s a method to my madness. Before you jump into writing business plans, designing business cards, and taking out ads on Facebook, you’re going to want to think about a few things. The following is a list of the different types of business structures you will want to decide between to get you jumpstarted on your brainstorming.
So you have an idea for a business and want to make it official. Or maybe you’re just a little low on self-esteem and feel that tacking “Founder and CEO of Urban Watermelon Innovations” or “Director of Kerblunking at Yachtswoman Industries,” onto your resume might just do the trick and impress some important people. Either way, it’s probably time to start filling out that paper work, right?
Before we go all Rambo on our paperwork, we should probably decide on the right business structure for you. This is important because the business entity you establish determines which income tax return form you have to file, though that’s only where the distinctions begin. So, what are your options?
If you recall from my introduction, I’m going to approach this as if I intend to start my own consulting firm in entertainment and technology. Let’s say, for examples sake, that I plan on entering into this with several friends and we all want to share in the responsibility, profits, and losses. While we shouldn’t make any rash decisions now without a decent business plan, I can rule out a sole proprietorship.
As you can see in the above, incorporating your business has a lot of benefits, but since my business is not already established and with any structure or any foreseeable revenue stream, the disadvantages seem to definitely outweigh the pros.
If you already have a small business which you want to incorporate, talk to a lawyer and consider receiving counsel from an accountant as well.
I don’t see my future company as having shareholders anytime soon, so we’ll tentatively keep an LLC in mind as we continue towards the next step: writing an effective business plan, the topic of my next post.
Thanks for reading and feel free to comment with any feedback or questions you might have from what we’ve covered thus far.