Start & Run a Graphic Design Business. Michael Huggins

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СКАЧАТЬ and easy when it comes to operating, bookkeeping, and taxes. The big drawback to a sole proprietorship is that all your business obligations are also your personal obligations. It means you personally take all the risks and liabilities. If your business owes money, you owe money. There is no separation. Also, as a sole proprietor you won’t have a lot of taxable benefits.

      1.2 Partnership

      This is one level higher than the sole proprietor structure. It’s a business arrangement where two or more individuals share all the income, expenses, and risk. It’s essentially a proprietorship with more than one proprietor. As discussed in Chapter 3, there are many pros and cons to having a partnership that you will need to consider carefully if you decide to go this route.

      Taxes for a partnership are slightly different than for a sole proprietorship. Different forms for taxes need to be completed by you and your partner. For more information on partnership taxes in the US, contact the Internal Revenue Service (IRS). In Canada, contact Canada Revenue Agency (CRA).

      1.3 US limited liability company (LLC)

      An LLC is similar to a sole proprietorship in relation to most of the organizational and taxation simplicity. It has some personal financial liability as well.

      In the US, an LLC is made up of one or more owners. LLCs are afforded limited liability from company debt and are given the opportunity to choose between being taxed like a corporation or a sole proprietorship. This type of company allows small-business owners who do not want to incorporate the opportunity to have the freedom of limited liability from company debt.

      The main advantage of an LLC is that the members are protected from some liability for acts and debts of the LLC, but are still responsible for any debts beyond the fiscal capacity of the entity. In most states members are treated as entities separate from their members.

      One of the main disadvantages of an LLC is that there are more forms to complete. For example, you must file Articles of Incorporation with the Department of State in the state in which you will be conducting your business. The filing fee and minimum tax fee vary according to the state you do business. Another requirement of an LLC is to create an Operating Agreement that details what each partner’s participation in the business is going to be. It is not required to file this agreement with a government agency but you are required to store the agreement in the place of business. Check with your Secretary of State office for any other requirements it may have for LLCs.

      See How to Form and Operate a Limited Liability Company, a book in the Self-Counsel Press Legal Series for more information about LLCs.

      1.4 US Corporation

      The biggest advantage of a corporation structure is that the company is seen as separate from its owner(s) in the eyes of the law. That means if you properly charter the corporation, any legal action taken against it won’t endanger you as the shareholder (person who owns shares in the corporation) beyond what you currently have invested in it. A corporation owns all the assets of your business (from the money in the bank to the paperclips in your holder). You can set up one or more people to own the corporation. Plus, there are tax benefits available to you under this structure that are not available to you under any other structure.

      If you are interested in incorporating, you’ll need to follow the laws and procedures of your particular state. You can still have your corporation to operate in other states as long as you are registered to do business in those states.

      The downside is that setting up a corporation structure is going to cost you more. You’ll need to pay a lawyer to counsel you and lead you through the process. There are different incorporated structures available to you (subchapter “S” and subchapter “C”) each with their own unique differences and tax advantages. Again make sure you seek counsel from your accountant and your lawyer as to which structure best suits your needs. Don’t overlook the fact that your bookkeeping will become more complex (and therefore more expensive) so you will probably need to hire an accountant to help you on a scheduled basis.

      1.5 Incorporating in Canada

      The advantage of incorporating in Canada is that your company will have limited liability, which means you are protected personally from lawsuits and creditors. If the corporation goes bankrupt, your personal property and

      finances should be safe unless you have provided personal guarantees for the corporation’s debts. If the corporation goes bankrupt, you will not lose more than your investment. Creditors cannot sue you or your fellow shareholders for debts incurred by the corporation.

      The disadvantage to incorporation is the higher costs for the business start-up. With a corporation you will need to deal with the shareholders, board of directors, and officers. There are also more documents that need to be filed such as Articles of Incorporation, an Annual Return, notices of changes in the board of directors, and change of the address of the registered office. The corporation must also maintain certain corporate records, file corporate income tax returns, and register in any province or territory in which it carries on business.

      2. Business License

      Business licenses are permits that are issued by government agencies allowing you to conduct business in specified jurisdictions. Business licenses vary between countries, states, provinces, and local municipalities, and sometimes you may be required to have more than one license or registration certificate even if you are just operating out of one location. Be sure to check with your local government office and local municipality regarding the steps you need to take in order to acquire the necessary license(s) you’ll need. Sometimes this is as simple as registering your business name and paying a fee.

      There is also the matter of taking care of taxes that are your responsibility once you have registered your business. Ask your local state, province, or city department of revenue for a copy of sales and use tax rules and regulations to be sure you understand and adhere to your local laws.

      3. Employer Identification Number or Business Number

      Another item you’ll need in your business is an Employer Identification Number (EIN) if you are in the US or a Business Number (BN) if you are in Canada. This is a number for your business that is similar to your social security or social insurance number. It’s what the Internal Revenue Services (IRS) or the Canada Revenue Agency (CRA) uses to keep track of their business taxpayers.

      All businesses require an EIN or BN even if you don’t have employees. The only exception to this would be a sole proprietorship. In this case you could use your social security number or social insurance number in lieu of an EIN or BN. However, if you are a sole proprietor who wants to hire employees, then there is no option — you’ll need an EIN or BN.

      In the US, to get an EIN you’ll need to complete an SS-4 form with the IRS and send it to your region’s IRS service center. You can obtain this form from the IRS, your local bank, or your accountant. The process takes about four weeks and there is no charge for the process.

      In Canada, you’ll need to contact the CRA to set up your company’s CRA accounts and then file a request for a Business Number. You can register for your Business Number by phone, fax, mail, on the Internet, or in person. You’ll need to fill out an RC1 form to request your Business Number.

      If you are in the US, keep in mind that you may also need to get a state employer identification number from the СКАЧАТЬ