A Common Choice...but Will It Work For Your Business
When starting your business, choosing the right business entity is probably one of the most confusing, but important decisions you will
need to make.
You'll need to analyze the consequences of utilizing different types of business entities along with the purpose and goals of the business entity. Choosing the right entity will depend on three primary factors: liability, taxation and record-keeping.
Sole Proprietor
A common entity a that many new small businesses start out with is a sole proprietorship. It is the simplest, least complicated, and cheapest form of business ownership. It acts like it sounds. Owned and operated by an individual.
Or possibly a husband and wife since the IRS makes and exception for married proprietorships. If you have a sole proprietor business, and your spouse works for the business, and not classified as a partner or an independent contractor, the business may still considered to be a sole proprietorship.
Every year, the number of sole proprietorships founded by women increases. Most likely due to the ease and costs of starting a sole proprietor business.
DBA
They often operate under the name of the owner of the business, but this is not a requirement. But if you are going to engage your business in a name other than your own, you must register your business name with your local government. Contact your local town or city government's Register of Deeds. It's a fairly simple process. Depending on your area, you can register the name you have chosen for a couple of dollars. When you're at the Register's office, they will have you do a simple search to make sure no one else is using the name you have chosen. So you may want to come up with a couple of back you names just in case yours is not available.
Profits
Sole proprietors must pay taxes on profits from the operation of their businesses. Profits or losses pass through to the owner directly. This is generally known as "pass-through" taxation, because business profits pass through the business to be taxed on your personal tax return.
If you need to adapt your business to the market, you can do so instantly. Are easy to control since you are the only person making decisions, and spending. If you budget permits, you can easily hire out what you can not do well or get to.
Risks
Sole proprietorships are not without risks. Although they are inexpensive and easy to create, the bad news is that you and the business are one in the same; if something goes wrong, you are personally liable. Overall, sole proprietorships are risky entities in that they could cost you and your family all you own. Plus, no other entity is more scrutinized by the IRS.
Seeking Advice
When I started my first business, I was fortunate to have a friend who was starting her business at the same time. We were able to share business secrets that greatly reduced our learning curve.
You may not have a friend like I did, but you might find it very helpful to consult with a mentor. Possibly another business owner who successfully operates their business. It doesn't have to be the same as yours. As long as it is a beneficial relationship for both parties.
Visit www.moms-work-from-home-tips.com for additional information or to request a copy of the Free ebook, Make Your Words Sell.
Elizabeth Bambara has been working from home since 2001. Living her dream of working from home. Helping others achieve their dreams too.
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