Owning a Business – Taxes, Trusts, and Other Tips
I want to own my own business – great news! Where do I start? That is a question that frequently walks through my door along with a hopeful and wide-eyed individual, who is anticipating getting wealthy beyond their wildest dreams through business ownership. While this sometimes occurs, the truth is that business ownership can be very rewarding, but also very full of pitfalls and hazards, if you don’t know the logistics of operating a business.
Fortunately, we assist business start-ups as well as existing businesses every day, tackling many important topics of the logistics of owning a business. Here are a few of our most important tips.
Entity Selection
Should I be a corporation, a limited liability company, or do I even need to have a company?
The general answer is that most businesses need to have an “entity”, or a formalized type of business organization. What type is best for each business depends upon many factors, but generally for a “for-profit” organization, an LLC is now the preferred entity type, and for a “not-for-profit charity”, a corporation is the preferred entity type. As with most types of legal work, this is not really a do-it-yourself project, because most people don’t know the right features, language, and next steps to do this properly, so please do use an attorney to set up your entity, (even though it is possible to do this yourself on sunbiz).
Tax Elections
I didn’t know I needed to make a tax election……many individuals who set up an entity themselves don’t know they must make a tax election in a timely manner. A tax election means filing forms with the Internal Revenue Service that select how you will be treated for tax purposes for the rest of your business life. If you don’t make an election, the IRS will pick one for you, and it is probably not the one you should have (and will cost you big $$$$ if you choose incorrectly or fail to choose). Please consult a professional in this area, and don’t forget that there is a short deadline for making a tax election after setting up an entity.
Other Necessities
Obtain an EIN, TIN, FEIN, whatever you want to call it….this is a federal identification number that will be associated with your business FOREVER. It is used to open a bank account, make a tax election, and use for many other purposes. If you aren’t sure about how to do this, don’t attempt by yourself, AGAIN – consult the right professional.
Bookkeeping – every business must keep a set of books. This is for two purposes – First and foremost, so that you are aware of the income, expenses, profit, receivables, payables and all the financial aspects of your business at any given moment. Second – so that you can prepare a complete and accurate tax return at year end, and maximize tax savings opportunities. We recommend that clients confer with us about what is the proper bookkeeping software to utilize and what version of popular accounting software works best for each type of business and level of expertise.
Insurance – every business needs insurance – so don’t forget to contact your property and casualty insurance provider to see what types of insurance will be needed for your business. You do not want to subject yourself to unnecessary risk by failing to have the proper types of insurance. For some professions, it is illegal not to be properly insured, so do not skip this important step. We have a great property casualty insurance provider to recommend for this purpose – Moore Resource Insurance in St. Petersburg – call Dave Moore or Wes Bryan at 727-323-0206 for a business insurance review.
Estate and Business Succession Planning – If you start a business, it is an asset that you own. Don’t forget to plan for the future. Who will inherit the business? What will you do if you become disabled and cannot work in the business anymore? Do you have debts in the business? Will a family member take over the business, or do you desire to sell the business once it becomes profitable? Failing to plan is planning to fail. Please allow us to address these important issues with you concerning your business and its future.
Fortunately, Chechele Law helps business owners with all these aspects of business ownership and more. If you own a business, or wish to start one, please schedule your consultation with us today, to learn about what it takes to run a successful business!