If you are looking to set up a small business, then there are a number of steps that you need to go through to make sure that you can operate legally. While these steps are not onerous, they can sometimes be confusing. While it is entirely possible to handle the entire process yourself, it is a good idea to get legal advice from an experienced lawyer such as Dr. Shahram Shirkhani. However, it’s also important to have a high-level understanding of the process yourself so that you can make the right choices for your particular circumstances.
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One of the first things to determine is exactly what sort of company you want to form – there are a number of different options available. The most basic is a sole proprietorship, where you own the company and are personally responsible for its profits and losses. The second is a partnership, where two or more people own the business – in all other ways this works in much the same way as a sole proprietorship.
If you want to limit your liability and still function as a partnership, then it is possible to set up a limited partnership, which is usually a structure used in very specific circumstances. If you intend to continue in business indefinitely, then it is better to set up a limited liability company, which combines the flexibility and tax benefits of a partnership with the limited liability of a full corporation.
If you are setting up a larger company with a number of employees, then you will probably want to opt for a corporation. The most common of these is a C corporation, which exists as a separate legal entity that shareholders own – this means that it is legally liable for the actions of the business, not the shareholders. The alternative is an S corporation, which is similar to a C corporation, but differs in the way that taxation is handled. However, don’t automatically assume that you should form a corporation – the cost of administration is often high, and there are complicated legal and tax requirements.
Depending on your business type, you may need to register your business with your state government. This is the case if you are setting up a corporation, a limited liability company or a partnership. Filing requirements differ from state to state, so you need to check which specific procedures you need to follow in your state. You will also need to find out if the name you have selected for your company is already taken in the state – if it is, you will need to choose another one.
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If you are setting up a sole proprietorship, then you will not need to register. However, if you decide not to use your own name to do business – for example, if you call yourself Acme Widgets – then you will need to file that name in most states. This is known as a Doing Business As (DBA) name.