To make it as a small business owner, you must be passionate about the product or service you provide; however, passion alone is not enough to ensure success. Running a company requires some understanding of tax law, basic accounting principles, and employment law. And, unfortunately, these are not skills you can learn as you go. You must be familiar with business law from day one to structure the company correctly and file all essential legal documents. If you’ve been thinking about opening a business but are unsure how to get started, below are some answers to frequently asked questions about structuring a company.
Inquiries About Incorporating a Small Business
Why Should I Set Up an LLC?
A limited liability company is one of the most popular structures for small businesses. You can set up an LLC by filing a few legal documents once you decide who the owners are and which percentage of the company each will hold. An LLC does not have stock; instead, it is considered a “pass-through” entity. That means its profits—and losses—pass through to its owners’ personal tax returns, which alleviates some of their tax burdens in the early years, before the company brings in money.
Why Should I Set Up a Corporation?
Unlike LLCs, which do not have any distinctive classes of membership and give all stakes the same decision-making power, corporations have stock structures. This makes them far more appealing to investors, who want to see preferred shares. A corporation also allows business owners to set aside shares for employees, so they can have some equity in the company.
Should Freelancers Consider Incorporating?
Freelancers are sole proprietors, and thanks to tax reform, they can take advantage of certain financial benefits this year without forming an LLC first. For example, they may take a 20% qualified business income deduction in 2018 under the Tax Cuts and Jobs Act, and they can still deduct applicable business expenses. However, forming an LLC shields the individual from legal disputes. Typically, freelancers should consider incorporating when they need to hire employees or outsource some of their workflow.
What Documents Do I Need to Form an LLC?
If you have chosen an LLC for the small business or freelancing operation, you will need to prepare several legal documents and file them with various parties. Essential ones include an Articles of Organization, an operating agreement, and an application for a tax identification number.
Can I Change the Name of My Company After Incorporating?
If you want to change the name of an LLC, there are a few critical steps to take. Confirm that the name is not taken by another LLC in the state. Then, draft a resolution detailing the name change and have all owners formally approve it. This should be followed by amending the Articles of Organization and the operating agreement and, finally, modifying any business licenses and financial accounts.
If you want to open a small business but are overwhelmed with all the legal documents that come with doing so, turn to We The People of NY. Based in Chelsea, this locally owned and operated company has been providing document preparation for over 25 years. Whether facing a contentious child custody battle or drafting a will and health care proxy, you can turn to them for unparalleled legal services every step of the way. Visit the website to explore all the ways they can assist, or call (212) 633-2200 to discuss your needs today.