Start a Corporation for Your Home Based Business
There is a lot to consider
when you start a corporation or set up a DBA
(Doing Business As) which is commonly called a fictitious name. Here are some
questions that you need to ask before moving ahead.
Questions to Ask Before Creating a Corporate
Structure:
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When I form a corporation what paper work will I need?
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What is the difference from an S Corporation,
C Corporation, LLC and DBA?
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What if I form a corporation and then have a DBA under the same corporate structure?
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What benefits will my home based business receive from each structure?
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When do I want my accounting
year to start and why?
These questions need to be
addressed before you start your home based business. Many small business owners
file a DBA in their state and then they are able to get a sales tax
identification number and open up a business banking account.
This can work well for a home business owner
starting out on a small budget since a DBA is usually cheaper than to start a
corporation. When the profits begin to flow consistently, then some of them form
a corporation and pay the state fees to change the DBA ownership over to the C
Corporation or which ever corporate structure they choose.
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This decision should not be taken lightly. It is very important to research the different types of business ownership including corporations and how will they affect you, your family and employees.
Corporate structures come in many forms such as an S Corporation, Limited Liability Corporation (LLC) and C Corporation. Each one has special rules, advantages and disadvantages. You will need to talk to a qualified consultant on this matter to find out which entity will work for your home based business currently and in the future.
Items to Consider before You Start a Corporation or DBA
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Ownership
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Profit Distribution
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Share Holders
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Share Distribution
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Tax Structure including Deductions
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Benefits and Employee Plans
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Retirement Plans
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Depreciation
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Death Benefits
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Insurance
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Protection from Creditors
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Salability
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Accounting - Fiscal or Calendar Year
My suggestion is to do a search of the various types of business entities first and get an understanding of the principles behind each corporate structure as well as the DBA. Then you can ask better questions of a tax consultant, attorney and business consultant.
You can find most information at the government websites which you can find in my business directories area. You will also be able to decipher
what is good information and possibly not so good. I have found that each tax
consultant, attorney and business consultant has a different opinion on the subject.
Bottom line:
It is very important to talk to someone who knows the tax laws in your state or country and can give you the proper advice on what is need to start a corporation. Asking the right questions will save you thousands in attorney fees if you have to create another corporate structure because of bad advice and ignorance.
I have put together some online resources that I use at my Incorporation Services page.
Your home based business needs a firm foundation to take you and your family to
the levels of success that you deserve and desire.
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