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| Saturday, February 28, 2009 |
| Choosing The Right Business Type |
Creating a new online business is not unlike creating a new stand alone e-commerce business. When you do this you will need to create a business entity. You will need to decide what type of business structure or entity you are going to create. This is important and depends on the overall goal of the company. Tthe four initial options are listed below along with a brief description to help you decide which type to choose. It is important that you understand that this is in no way legal advice and we suggest you contact a small business lawyer to help you finalize your decision.
Sole Proprietor: A Sole Proprietor business entity is just what it sounds like: there is a single owner/operator. This person will be responsible for all of the functions of the business. You can operate as a Sole Proprietor under your own Social Security or a separate employee identification number (EIN). Either way this is registered just like any other business. The downside to the sole proprietor business entity is that it does not offer any substantial tax benefits and you are held personally liable for anything your business does. That means that if your business gets sued they can attempt to take personal property or funds.
Partnership: A partnership is similar to the sole proprietor business entity with one exception -- there is more than one person operating the business. This is good in that it allows for two or more decision makers, however it has severe drawbacks. Just as in a sole proprietor business, the owners are held liable for the actions of the company. This means both of the owners are liable even if one of the owners was at fault. Tthis is not necessarily the best business structure for a high risk company.
Limited Liability Corporations (LLC): An LLC is a sound business structure for small businesses. It offers protection against lawsuits by separating the business and the person. If the business is sued, personal possessions or funds taken can not be taken.
To do this, funds cannot co-mingle. However, that is a small price to pay for added security. You can pay yourself a salary and take dividends as needed however they must be proportionately reasonable to the amount of money the company is taking in. This can be operated by one or more people but the owner does pay self-employment tax.
Corporation: There are two types of corporations, an "S" corporation and a "C" corporation. The s corporation has been around for quite a while. The rules and the laws regarding an s corporation are very clear and refined. The s corporation has more tax advantages for smaller businesses than the c corporation. A c corporation is for large scale publicly traded companies. For the most part an LLC will suffice for a startup business. The advantage to starting as an s corporation is that you can easily move from an s corporation to a c corporation with little to no difficulty. To move from an LLC to a c corporation you have to first dissolve the LLC. The move from s to c corporation is fairly easy.
Two government websites will help you through this process. They are the SBA Website and the IRS Website. You should visit these pages and browse around to get comfortable with them. We also have a training video that will help you navigate the SBA website to apply for a small business loan and a video for the IRS website to help you apply for an EIN. Both of these videos are very helpful. Just click on the link below and you will be taken directly to the video. |
posted by Arch Bishop, Dr J. O Faola @ 2:13 PM  |
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| About Me |
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Name: Arch Bishop, Dr J. O Faola
Home: Shibiri Ekunpa Oto-Awori LGDA, Lagos, Nigeria
About Me: His Grace Prof. Prince J. Faola (JP)., He is the Senior Pastor of the Shield Of Faith Gospel Mission Int. and the founder of the “Joel International Ministerial and Theological Academy”. He is an international Bible teacher and a passionate author and bible expositor, he is a patron and adviser for Christ Believers Ministry. He is a member of BSN and IMCGBN, the President of JECAL CLUB, The founder of the PARLEY CLUB INT, Chairman of I.M.A.T.E.B. Chairman Board of Regents Christ’s College of Theology, a well known Radio Pastor and most sought after aggressive motivational speaker.
See my complete profile
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