Launching a successful business requires more than just a good business plan or a new idea. Making informed decisions during the start-up process can place your business on course to succeed!
- The first question is whether you should form a “business entity”, and if so what type of entity should you form? – In Michigan there are several “business entity” options, including Sole Proprietorships, Partnerships, Limited Liability Companies (LLCs) and Corporations. Important factors to consider when selecting an entity type include the tax treatment afforded the business entity and you; the future sale or succession of ownership interests in the business; as well as limiting the owner’s exposure to personal liability. In regard to liability for instance:
- Sole Proprietorships place your personal assets at risk in the event a claim is brought against your business. This means that you could possibly lose your home, your savings and/or other personal assets.
- Partnerships can actually expose you to even more risks than sole proprietorships. In a general partnership you can also be held responsible and therefore liable for certain actions taken or not taken by your partner(s).
- LLCs and Corporations may protect personal assets and may limit personal liability.
- So, if you want to limit your exposure to personal liability which is better, an LLC or a corporation? Taxation and record-keeping are other important factors to consider when selecting between an LLC and a Corporation. The best way to determine which type of entity best suits your needs is to consult an experienced business attorney or CPA.
- Should you hire Employees or utilize Independent Contractors? Under current IRS guidelines the determination of whether people who work for you are considered to be Independent Contractors or to be Employees depends in part on your level of control over them. If you control how, when, or where they work, the IRS will consider them to be Employees. Also, the number of Employees will be a factor in determining how healthcare laws affect your business. Speak with a business attorney or CPA to help insure that you understand the regulations which affect these important areas of doing business today!
Do you also need a business permit or license? Registering your LLC or Corporation with the state is not the same as obtaining a business permit or license. The city, county, or state where your business is located may require special business permits, and/or may impose special regulations on your business.