End Goal: Choose a Business Structure #

Business Structure: #

You have probably already heard a lot about various business structures based on your research during phase 1.  The bottom line is that most small businesses should be legally structured as an LLC.  An LLC is inexpensive and very easy to start.  It offers all the legal protection necessary for a small business. A Sole Prop and LLP are viable options for specific situations but we do strongly recommend getting an LLC even if you are a one owner company.

1. Disregarded Entity – A Single member LLC is considered a disregarded entity in the view of the IRS, but it is still worth doing.
2. Multi-member LLC – considered a partnership.
3. LLC can take an S-Corp or C-Corp election.  This means they are legally structured as an LLC but are taxed as a corporation.  An S-Corp Election gives great tax advantages. 

Corporations: #

They are also a solid business structure, however, if you are thinking of a Corporation you should really be working with an accountant.  S-Corps and C-Corps have specific advantages that a small business owner shouldn’t learn on his own.  So, our only suggestion here is that if you think a corporation is right for you then it is worth consulting with a professional to confirm.  

Non-Profits: #

While these phases are primarily for small businesses intended to make a profit, these steps can still be useful.

1. It is important to note that a non-profit can operate alongside a for profit business.

Forming your Business Structure: #

You have to file your LLC documents with your state’s Secretary of State.

1. We should also mention that when you pay for the LLC you may get scam letters in the mail saying to pay for your certificate, but they are scams you have already paid for it.
2. Articles of Organization – The articles of organization is a document needed to form an LLC in every state. In essence, it just delineates responsibilities, duties, and liabilities of the people within the LLC towards the company, and the LLC towards the people who work there.
3. Certificate of Limited Liability – Definition and Example
4. Yearly Fees on this.  Some states offer multi-year LLC licenses.  You usually have to file an annual certificate.

Operating Agreements: #

Every business typically needs an operating agreement.  This is a legal document that states general information about your business and how certain situations are handled. 

Additional Business Documents to Include: #

1. Bylaws for Corporations
2. Shareholder Agreements
3. Addendums to Operating Agreements

Federal ID Number: #

Every business should app ly for a Federal ID Number.  They are called FEIN (Federal Employer Identification Number, EIN (Employer Identification Number), or a taxpayer id; they are all the same number.  Think of it like a social security number for a business.   Be aware of scam websites.

1. Form SS4 is how you paper file for a FEIN instead of using the online wizard.