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In Business On
March 10, 2017

The 5 Legal Documents Businesses Need When Getting Started

Legal Documents for Businesses

Starting a business can be one of the most exciting decisions you make, but setting up your business in a safe and legal way is one of the most important parts of this initial process. While the types of legal documents for starting a business can vary depending on the industry, below are the six main documents most businesses need when getting started.

BUSINESS LICENSE

Acquiring a business license is not a task you should put off. Without a proper business license, you could be charged pricey fees and your business might not even be protected legally. License and permit requirements vary from state to state, so do some research regarding which kind of business license your business requires first. Remember to renew your business license every year in the county your office is in—the fees will depend on your revenue.

ARTICLES OF INCORPORATION OR ORGANIZATION

There are multiple ways to structure your business. Organizational structures can range from a sole proprietorship to partnerships, limited liability to corporations and sub-chapters. For more information on the specifics of each structure, please see my LinkedIn article “What Business Structure is Right for You?”, detailing the types of business organizations.

If you run an LLC, which is one the most popular type of business entities, you want to invest in an operating agreement. This document is the agreement among owners, that pertains to financial and managerial duties, who owns what percentages, and what should happen if one of the owners decides to leave.

EMPLOYER IDENTIFICATION NUMBER

For-Profit businesses and nonprofits will need to acquire Employee Identification Numbers ( EIN numbers) for tax purposes. This number is applied to businesses in the same way that social security numbers are applied to individuals.  The easiest way to acquire these tax ID numbers is online at IRS.gov or to seek a tax professional. When the proper form is complete, the IRS can provide an immediate letter via email with the assigned Employee Identification Number.

PROFESSIONAL LICENSES

Professional licenses differ based on the type of trade practiced by the business. These licenses are also dependent on the state in which the business will operate. For example, child-care providers, carpenters and plumbing businesses require specific licenses to operate. But certain states also require massage therapists to get a license. A quick call to your state’s business services office will clarify which licenses or permits are required to operate.

LOCAL LICENSES

Some counties and cities require separate permits to conduct commercial activity. For example, some cities in the US have control of liquor licenses within the proximity of certain communities or areas. You will need to check with the county clerk in the locality of the new business, to determine if any additional licenses or local regulations are required. Many local governments also require sales-tax permits. This is based on the sale of specific goods and services. The county clerk will be able to provide the specifics on which permits are needed for these taxes.

If you are thinking about starting a business, there are several things to consider: who you will be partnering with, the yearly cost and how many people the business can initially hire, the organizational structure of the business, legal liability, tax implications, and which licenses you need to operate. As a new business, you may want to seek funding eventually, or maybe even lease out an office. Because some of these processes may require these documents, you want to make sure you invest the time and money into getting them developed.

 

In Business On
March 10, 2017

Transforming Your Talent into a Successful Business

Transforming Your Talent

Do you have a talent that you’re passionate about and excites you? Would you like to make money from your talent but don’t know how? Believe it, you can transform your talent, gift or calling into a successful business. Often times, people find ways to monetize their talents but don’t establish the business foundation necessary for growth and longevity. The fallacy is doing work you’re passionate about will bring you money. The truth is that taking the time to transform your talent into a viable business model is critical to your success. Here’s why:

Better Benefits

The leap from part time hobby to full-time career might seem intimidating but it’s worth taking. When you’re good at what you do, enjoy doing it and find a market fit, why wouldn’t you want to turn it into your daily reality? This requires stepping out of your comfort zone and venturing into the unknown. You’ll be able to cultivate your talent and earn a living at the same time. Socially, you benefit by way of professional and industry connections made along the way.  Practically, you benefit from formalized business structures through standardized pricing, processes and protection (against legal issues).

Business and Talent Belong Together

Developing your talent and nurturing your business must go hand in hand. Turning your passion into a solid business is more reason to foster your talent. In the early stages, you are the biggest asset to your company. As your talent matures, so can your business because you are providing added value to your customers. Successful businesses specialize in solving problems and providing what people want to buy. Continue to nurture your talent to stay relevant. As long as demand for your talent exists, your business will thrive.

Have a Strategy

Creating a strategy to brand your talent is critical. Your brand has a significant impact on how people view your business and yourself. You must constantly cultivate talent, your brand and your business strategy. Branding yourself dictates what people think, experience and say about your company. Your audience cares about your brand, so you must care too. Developing a business strategy is an important part of your company’s success as well. How will you market your business? What’s your pricing strategy? Who will pay for your talent and what are their wants, needs, and interests? These are just a few of the many questions you must consider when crafting a strategy. Remember that your strategy should include measurable results so that you can determine what tactics work best for your business. Be careful not to let your brand come before your customers. It’s a waste of time and money to perfect your brand at the expense of delighting existing customers while acquiring new ones.

Use Social Media and Networking

Leveraging social media and personal networks is vital to growing your business. In order to find more opportunities, take advantage of all the resources available via social media and networking. Not leveraging either of the two will hinder the rate of your business growth. There are so many ways to connect and collaborate with others including working with non-competing businesses for mutual referrals and strategic partnerships. Social media and personal networking provides you an audience to share and connect with and potential business leads. Social Media does require extra effort on your part as there is a lot of work involved with planning your social media and sustaining relationships. It’s well worth the effort since the content you share will connect you with prospective fans, customers, and colleagues. Social media is one of the most cost-effective ways to grow your business, as is growing and maintaining a personal network.

Turning your talent into a successful business can seem overwhelming, but if you are strategic, you will be well-positioned for success. Your first year might be especially difficult, but doing work you’re passionate about will sustain you through challenging times. The legal and financial aspects of establishing your business truly matter, so perfect your pricing, acquire the proper business structure/licensing, and create business goals to stay on the right track. There is no better time than right now to turn your passion into your very own business.

In Business On
March 10, 2017

The 5 Biggest Startup Myths

 5 Biggest Startup Myths

In the early stages of starting your own business, there is no shortage of information available to you with the click of a button. While most information is meant to be helpful, there is an abundance of information that is inaccurate or untrue. Determining what’s fact and what’s fiction can be overwhelming, so we’ve taken the time to debunk the 5 biggest startup myths to help you navigate your startup journey:

  1. If you build it, they will come – This age-old saying is misleading. Building a company will not guarantee its success. Regardless of how many people you think will fall in love with your brand, true success comes from marketing your business and engaging your audience. Brand recognition is an on-going effort. There will always be new customers to engage and untapped markets to penetrate.
  2. Venture Capital is a must – Startups that are able to secure venture capital generate a lot of buzz, but do not be discouraged if that is not you. There are a variety of funding options available to raise money. Crowdfunding platforms are increasingly popular ways for entrepreneurs and small businesses to raise capital. Of course, you still have your traditional lending sources as well. Another option, too, is to forgo outside funding altogether and opt to bootstrap your way to profitability.
  3. Protection can wait – Protecting your ideas and products was not always a precaution entrepreneurs took early on, but times are changing. Due to the popularity of crowdfunding sites and social media, protecting your ideas is important now more than ever. If you have a product idea, filing a provisional patent is a smart and inexpensive way to keep your brand safe until you can afford a formal patent. If you have a business name you really want to use, make sure you register it with your state corporation/business division so you can secure it for your use. If you are not sure what method of protection to pursue, contact a professional to determine your startup needs. It’s better to be safe than sorry.
  4. Wait until the “right” time – If you wait until the perfect time to start your business, you’ll be waiting for forever. Life stops for no one and odds are that the “right” time won’t be the crystal clear moment you imagined. If you are passionate and serious about what you want, the time to pursue your dreams is NOW. Make time in your schedule by planning out your week and eliminating procrastination. You will be glad you did when your vision becomes a reality.
  5. Failure means you should give up – Nobody looks forward to failing, but even the most successful business owners have experience failure. How you manage through failure builds character and gives you the opportunity to learn lessons that will determine future success. Failure can actually be good for you as it teaches lessons that success cannot. In fact, some investors prefer to invest in companies run by people who have failed at least once. Failure can be discouraging, but don’t take it as a sign that you should abandon your dream. Brush yourself off, learn from the experience, and try again.

Receiving advice and learning from the wins and losses of other startups and entrepreneurs is encouraged.  As you research and seek advice from others, be mindful of biases and information not backed by research. The advice provided in this article is intended to help you navigate through the early stages of starting your business.  Always remember to fact check and evaluate multiple sources so that you can make the best decisions possible for your business.

In Business On
December 20, 2013

What Business Structure is Right for You?

There are many factors to consider before creating a business. Amongst them may be the most important one of all, choosing the correct business structure. Your entity structure will be the framework for your company and will determine a ton of things, including what type of taxes that need to be filed. Below are the main types of businesses you can choose from.

Sole Proprietorship

The simplest option available, a sole proprietorship is what’s called an unincorporated business (a structure whose liability is personal for the sole trader) with a singular owner who pays personal income taxes on profits from his or her business. Known for having little government regulation, this option is relatively easy to set up or dissolve, making it the go-to for singular business owners/contractors with an entrepreneurial spirit. Many proprietors operate under their legal name, given a business, trade or fictitious name is unnecessary. If you are looking for a small business structure with simple, low tax rates, a sole proprietorship may be the best.

Partnership

This structure is an arrangement between two or more individuals who share profits and liabilities of the business entity. A partnership can mitigate the pressure that would commonly be associated with a sole proprietorship, while also offering several more variations to choose from. A general partnership (GP) has all parties share legal and financial liability equally, while a limited liability partnership (LLP) insulates partners’ individual assets if something unfortunate were to happen to another partner. The third option is the limited partnership (LP), a hybrid of the GP and LLP structures. At the very least, one partner must be the general partner, a person with full personal liability, while another must be limited to the amount he or she has invested into the company. A somewhat similar tax treatment to a sole proprietorship, partnerships do not pay income tax, as it is passed on to the partners themselves.

Limited Liability Company (LLC)

A hybrid of a corporation and a partnership, LLCs hold a structure in such a way that members of the company cannot be held personally liable for the company’s debts, while allowing pass-through taxation (the entity’s income is treated as direct income for the owner/investor; similar to a sole proprietorship). Owners of LLCs can be as simple as a single individual to multiple people to multiple companies or corporations. LLCs are structured similarly to an LLP, though the options vary from state to state. Though boasting some attractive incentives, LLCs carry a number of disadvantages that you should know before a decision is made. For instance, if an LLC has several members and one of them files for bankruptcy or passes away, the LLC must be dissolved.

Subchapter S (S-Corp)

A Subchapter S (named after the chapter of the Internal Revenue Code in which it falls under) or S-Corp, is a domestic corporation with a single class of stock and no more than 100 shareholders. The requirements allow it to be taxed as a partnership while enjoying the benefits of incorporation. As long as the requirements are met, any profits earned by an S-Corp are taxable at the shareholder level instead of a corporate one, avoiding double taxation of traditional corporations; a major advantage when considering this structure.

Corporation (C-Corp)

Among one of the larger and more popular structures, corporations have the ability to limit legal and financial liabilities of their owners. C-Corps are considered an entity separate from its owners and, unlike an S-Corp, income is taxed twice—once at the corporate level and again when distributed to its owners. Owned by stockholders, these individuals elect a board of directors which in turn makes important decisions with regards to the corporation. And while this type of taxation can most certainly be seen as a drawback, corporations have the ability to reinvest their profits in the company at lower tax rates. It’s a corporation’s own styling of “high-risk, high reward.”

If you are an aspiring business owner and considering which structure would be best for you, there are several things you should keep in mind. Legal liability, tax implications, cost of forming, ongoing yearly costs, and future needs can all help determine which way to go.