By Solid Serenity Legal Services
I get questions, almost daily, from many people who want to be their own boss. They want to become entrepreneurs and run their own businesses. And, most of them know that they need to do something to protect themselves, but they’re not sure what, exactly, that is.
One of the best ways to protect yourself is through a business entity. A business entity can allow you to limit your personal liability. An entity essentially separates your personal assets and your business assets so that, in most cases, people cannot go after both if you were to be sued.
So, how do we do this? How do we establish a business entity?
(1) Pick Your Entity
First, we need to decide what we want our business to be. You have many options. The ones who afford you the greatest protection and limited liability are limited liability companies, corporations, and S-Corporations. Partnerships and sole proprietorships are options, but their owners are not protected from liability for business activities. Their personal assets will be subject to lawsuits and business disputes.
In my experience, limited liability companies are the most popular. This is because they do not require Boards to run them and can have as many, or as few, owners as you want. They also allow owners to determine how they want to be taxed. They are the most flexible entity. Of course, you need to speak with a professional, or do your research, to determine what is best for your situation.
(2) Get Registered
Once you decide what you want to be, you have to pick a name and register with the Secretary of State for the state(s) you are operating in. In Oklahoma, all you have to do is go to the Secretary of State web site, choose Business forms, your type of entity, input your info, and pay- all online.
If you have more than one owner, you will want to seriously consider an agreement that outlines who owns what, who contributed what, and what happens if someone leaves or dies. These documents are very important in helping you to minimize future risks to your business. I have had many business clients learn the hard way that these agreements protect you and your business from a lot of people problems that come with joint ownership of a business.
(3) Licensing and Permits
You’ll also want to consider any licenses and permits you’ll need to do business, and get yourself insured and possibly bonded. What licenses and permits you’ll need will depend entirely on the type of business you choose to run.
(4) Taxes
You will need to file for an Employer Identification Number (EIN) with the federal government for tax purposes. This can be done entirely online at www.irs.gov. Depending on your industry, you may also need to set your business up for local sales taxing and unemployment and worker’s compensation insurance if you have employees.
Business ownership is an exciting, and stressful, time. Be sure you have what you need to be successful and get yourself a business entity today!