Achieving success as an entrepreneur requires you to have the ability to choose the right product to sell or service to offer. This way, you can make sure that your company stands out among its competition. Aspiring business owners often select something they are interested in or passionate about. No matter what it is, you have to make sure that there is a need for your product or service in the market. If you decide on creating an LLC, you can expand your business to other states. You just have to register as a foreign LLC.
What Is Next
Once you have made up your mind on the product or service, you have to create a solid business plan. This will serve as your guide through every stage of starting and running your business.
Among the decisions you have to make in order to complete a business plan is the legal structure of your company. The choice you go for will determine the requirements you have to submit for registration and the obligations you will need to comply with.
Choosing a Legal Structure
Before thinking about how to structure your company, you will have to understand the industry you will be in and the federal, state, and local laws that govern businesses. Depending on the state where you will operate, your tax obligations and the registration process may vary.
Evaluate each legal structure and find out which of them offers the most advantages for your business. To help you get started, here are the most common types of business entity structures:
- Sole Proprietorship – A sole proprietorship is the simplest form suitable for businesses with only one owner. With this, the owner is the only person responsible for all the profits and debts of the company. The business and owner are a single entity. Among the advantages of this structure are that it is easy to set up, the cost of running the business is low, there may be certain tax deductions, and it is easy to dissolve.
- Partnership – If there is more than one owner, then you may choose to form a partnership. There are two types: general and limited. Those that share everything equally are general partnerships. Meanwhile, it is a limited partnership if only one of the partners has control of the business operations. It is a good option if you are forming your business with a family member, friend, or business partner. Like a sole proprietorship, forming a partnership requires little paperwork.
- Corporation – If you want your business to be a separate entity from you, then you may consider forming a corporation. With this legal structure, the shareholders will not have personal liability for any claims against the company. Your liability will only be for your personal investments. A corporation can also continue to operate even if an owner dies or transfers their shares. Raising large amounts of capital is also easier if you have a corporation. This legal structure is a good option for companies that are already further along in their growth. Learn more about forming a corporation by reading this article.
- Limited Liability Company (LLC) – Perhaps the most popular legal structure for new entrepreneurs is the LLC. It is known as a hybrid structure that has the good features of a sole proprietorship or partnership and a corporation. LLCs limit the personal liabilities of the owners, who are called members, and protect them in case the company incurs debts and obligations. At the same time, you can choose to enjoy pass-through taxation. The cost of forming and managing an LLC will depend on the state. If you already have an LLC, you get the opportunity to expand your business to other states. You only have to register as a foreign LLC. Check this article to find out more about forming an LLC.
Register as a Foreign LLC, If Needed
After deciding on the legal structure, the next thing you have to do is register your business with the state where you want to operate. Each state has its own laws, so the requirements and processes may vary.
Additionally, if you want to expand your business operations and conduct transactions in different states, you can choose to organize the company in one state and register with the other states. For example, you can form an LLC in New York and register as a foreign LLC in California. This way, all your company’s transactions in both states will be legal.
If you need help in handling the process to form a business entity, contact a third-party organization like DoMyLLC. Our team of experts is experienced in handling various state compliance requirements.