Choosing a Legal Entity

Which Legal Entity Structure is Best for Your Business

Determining the legal structure of your business is one of the most important business decisions you’ll ever make. This decision can significantly impact the security of your business as well as its profitability; the type of business you’re in can help you determine which entity to choose.

Sole Proprietorship

If you’re a single owner or a married couple just starting up, a sole proprietorship is the simplest business structure. If you work from your home, have no employees, and don’t require walk-in traffic, this may be your best option.

The best types of businesses for sole proprietorships are those with limited liability, such as internet sales, housekeeping services, medical transcription, and so forth. The income from a sole proprietorship can be reported on the Schedule C and the self-employment tax is reported on Schedule SE for Form 1040 for personal income taxes. Income is taxed at the personal rate, and losses can be carried forward.

Partnership

If you have a partner to whom you’re not related, you may not be able to have a sole proprietorship. In this case, a partnership is your best option. It’s always advisable to have a legal document detailing the responsibilities of each partner, both physical and monetary. There are four types of partnerships.

  • General partnership: Both/all parties share equally in the investment, the profitability, the management, and the liability of the business.
  • Limited Partnership: Limited partners are involved only to the extent of their investment and are not involved in the day-to-day activities. A limited partnership offers you more legal protection than does a general partnership.
  • Limited Liability Partnership: This type of partnership is usually used when one of the partners must be licensed by the state, such as an attorney or a doctor. There’s more latitude in management duties, and the protection offered is similar to the protection offered a corporation.
  • Limited Liability Limited Partnership: This relatively new type of partnership consists of at least one general partner and one limited partner. The general partner is responsible for day-to-day management, the limited partner is connected only by an investment in the partnership.

More detailed information on partnerships can be found here.

Partnerships are ideal for smaller companies that don't wish to incorporate.

Partnerships are ideal for smaller companies that don’t wish to incorporate.

Limited Liability Company

An LLC is a combination of a corporation and a partnership. It’s similar to a partnership for day-to-day involvement and income benefits but offers protection similar to a corporation. The tax ramifications are different for an LLC and a corporation and you should consult with an attorney before making a final decision. For more information on this subject, click here.

Corporation

A corporation is its own entity and is best used if you have a company that can incur significant liability, such as a general contracting company. A corporation can be sued to the extent of its assets but members or stockholders are protected. The corporation pays its own taxes. Any wages paid to its employees or stockholders are claimed on their personal income tax return and taxes are paid accordingly, which can amount to double taxation for stockholders.

Corporations are required to have at least annual meetings and minutes of the meeting must be filed with the Secretary of State. Filing fees and other costs are incurred, for more information, click here.

A corporation is subject to double taxation.

A corporation is subject to double taxation.

C Corporation

Another name for a corporation.

S Corporation

An S corporation is created to avoid the double taxation that can occur with a C corporation. An S corporation is not taxed, only the shareholders pay taxes on its income, which is passed directly to them. There are other legalities that must be observed and an S corporation initially requires more paperwork and more filing fees to establish.

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5 Reasons Every Business Needs an SEO Strategy

The internet has changed much about the way we live and conduct our business affairs. Just about anything we could want to know is now at our fingertips. The convenience of the internet has changed the way people shop, and has made it mandatory for every business to create an online presence. However, just having an online presence is not enough anymore, is it? You have to enhance your online presence by incorporating a well-structured SEO strategy.

Today, over 3 billion people around the world use the internet. SEO is essential if you want them to find your business online.

Today, over 3 billion people around the world use the internet. SEO is essential if you want them to find your business online.

SEO, short for Search Engine Optimization, is a series of tactics, techniques, and methodologies designed optimize a website so that it ranks higher in search engine results. Higher rankings generally result in more traffic to a site, and subsequently increased sales.

Here are five reasons every business needs an SEO strategy:

1. If You Don’t, You Will be Left behind by Your Competitors

Over three billion users search the internet on a regular basis. Over 90 percent of these users are looking for products and services online. To take advantage of this large customer pool, many businesses are working to improve their online presence with SEO techniques. You risk falling behind if your business isn’t doing the same. Your business is losing ground to a competitor who is using SEO to improve his/her position and move forward.

2. High Return-On-Investment (ROI)

Search Engine Optimization as a marketing tool is unmatched regarding ROI delivery. SEO is an inbound marketing technique that allows your business to market your products or services to people when they are searching online for these particular goods and/or services. With SEO, there is no convincing potential customers that they need your products or services, you just convince them that you are the right company to provide these products/services.

3. SEO Is Cost Effective

SEO is one of the greatest online marketing strategies. If properly executed, SEO can guarantee results. Other online advertisements are only for a fixed duration. SEO stays put and pays off in the long run. The number of geographical regions and keywords can be customized to fit your personal and business needs making it the most cost-effective and affordable online marketing strategy.

4. Perfect for Small Businesses

Owners of restaurants, retail shops, and other small businesses can customize their local SEO and directly connect with people looking for such since most of these searches come from smartphones. You don’t have to interrupt them when they are reading a news article online or when they are watching their favorite show on TV; the ad will just show up when they are looking at similar services or products.

In today's competitive marketplace, SEO is essential for local businesses to survive and thrive.

In today’s competitive marketplace, SEO is essential for local businesses to survive and thrive.

5. SEO Constantly Evolves for Bigger Opportunities

Markets are controlled by people’s tastes and preferences, and as such, they are subject to change as time goes by. SEO is a dynamic process. If you hire a professional SEO agency, they’ll do that hard work of tracking the ever-evolving market trends and making the necessary changes to keep up. With SEO, your business will be positioned to benefit from our increasingly digital world.

 

 

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10 Habits of Successful Business Owners

Being a successful business owner is about more than just making money. You must be able to effectively deal with the ups and downs to lead your business to longevity. After years in the consulting industry, we’ve come up with a list of the top 10 habits of successful business owners:

1. Focus on Strong Team-Building

As a business grows and you hire more employees, you must take the time to figure out what traits and skills you want in employees. Finding skilled talent may be difficult, but the impact to your business is worth the time and effort you’ll put into it. Once you’ve built a rock star team, you need to facilitate team building.

According to the Harvard Business Review, there are three key aspects of communication that affect your team’s performance:

  • Energy
  • Engagement
  • Exploration

As a business owner, you have to facilitate effective communication with these elements in mind. This helps build strong teams and company culture. The ability to hire well and build a strong team is crucial. It’s also just as important to know when and how to fire people when they aren’t performing or they’re hurting the team.

It's important to hire talent that can work together as a team to get the job done.

It’s important to hire talent that can work together as a team to get the job done.

2. Knowing How to Execute

Everyone has ideas. What matters is figuring out how to make the idea a reality, or in the business world, bringing it to market. Figure out how to execute and you’ll stand out as a business owner/entrepreneur rather than a mere dreamer.

3. Forward Thinking

Being a business owner often requires leadership. Part of being an effective leader is being bold and forward thinking enough to go beyond the proven paths and trends. To be the best, you must be a pioneer of some sort, even in small ways.

4. Staying Organized

Sometimes entrepreneurship stirs many ideas, which can cause you to be scatterbrained. Don’t just have great ideas, stay organized so you can follow through on them. Keep your business plan, meetings, and deadlines on a highly-organized schedule. If you’re not the Type A type, consider hiring an executive assistant or secretary that can keep things organized for you.

5. Having Confidence

A successful business owner does not let doubt get in their way. You must have a persistence to keep pushing forward and effectively operate your business, even when things don’t go as originally planned.

6. Effective Delegation

Sometimes it’s hard for you to let go and give someone else responsibility, but, if you want to grow a business, you simply can’t do everything by yourself. This is why hiring the right people is critical. With a great team, you can effectively delegate tasks based on each person’s skillset. As stated in one Forbes article, the key is to delegate the right things so you don’t waste time working on the wrong things.

7. Going the Extra Mile

Well-known entrepreneurs like Elon Musk and Mark Cuban were willing to take an extra step farther than everyone else. Having tenacity and dedication to carry out your commitment will help you in the long run, especially through challenging times.

8. Putting Customers First

Making your customers your top priority will create a better experience for them, allowing your business to grow a great reputation for service!

Create a company culture that's true to your values and that attracts the right kind of employees.

Create a company culture that’s true to your values and that attracts the right kind of employees.

9. Stay True to Their Company Culture

Part of the excitement of business ownership is instilling your company with its own culture. When you stick to this culture it drives creativity and the business takes on a life of its own.

10. Not Afraid to Take Small Steps

Even with big ideas at hand, successful business owners know that everything can’t be done at once. Sometimes it’s best to engage in incremental progress, seeing the whole process through.