Setting Up the Company

There are three most important factors to consider before choosing form of ownership for your company,

  1. Company Size – how big you want to grow your company
  2. Tax Consideration – avoid unnecessary cost
  3. Risk and Return – how much risk you want to take and how much return you expect to get also help you to determine your company form of ownership

Advantages of a Sole Proprietorship

  1. Profit Incentive
  2. Total Decision-Making Authority
  3. No Special Legal Restrictions
  4. Easy to Discontinue

Disadvantages of a Sole Proprietorship

  1. Unlimited Personal Liability
  2. Limited Skills and Capabilities of the Sole Owner
  3. Limited Access to Capital
  4. Lack of Continuity for the Business

A corporation is a separate legal entity apart from its owners and may engage in business, issue contracts, sue and be sued and pay taxes. The Owners of a corporation hold stock in the corporation. Each share of stock represents a percentage of ownership. The actual business of the corporation is conducted by the directors and officers of the corporation.

Steps to incorporate a business,

  1. select a local agent
  2. select the corporate name and check on the availability
  3. prepare the Certificate of Incorporation

Even though LLC and S-corp are similar in many ways, but they still have few differences between each other.

  1. LLC is easy to form and maintain without extensive records
  2. LLC tends to have a very small number of owners
  3. LLC can not take the company public
  4. Restrictions on transfer of ownership
  5. LLC may need to pay double tax like C-corp

 

8 thoughts on “Setting Up the Company

  1. This post is short, yet ON POINT! Great explanation of the advantages and disadvantages. If you could see yourself open a business today, how would you set it up and why?

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