Summary: In this particular episode, you will learn About Small Business Legal and Practical Tips Podcast transcript: Disclaimer: This information is for educational purposes only and not to be used as tax or legal advice. Tax law and accounting protocol are constantly changing. Seek an attorney and qualified accountant. Audio Small Business Accounting Tips, United States, Communicating with Your Advisors, Legal Structure of a Business, Personal Liability and Business Topics Small Business Accounting Tips, United States Communicating with Your Advisors Legal Structure of a Business Personal Liability and Business Small Business Accounting Tips, United States The focus of starting a business in the United States should be quickly finding customers for your goods and services. While liability and intellectual property protection are very important, aspiring business owners get caught up in the details of entity type, operation, and compliance requirements. Moreover, entrepreneurs stress over details and worry about someone copying an idea that few care about and even fewer have the capacity to implement. Thus, the optimal way to conduct business is to strike a balance between cost effectiveness and action by consulting insurance and legal professionals. Communicating with Your Advisors Seek people who have significant experience in your business area. Interview them and ask for specific examples of their experience. Prior to talking with others, maximize their time by first educating yourself on the basics. Document a business plan, including goals and exactly how to accomplish them. By planning and researching questions prior to meeting with advisors, you will be able to accomplish more with them. Legal Structure of a Business If there are two or more owners in a business, it is likely worth the associated cost to form a separate legal entity. Without a structure in place, two or more people in business together may be classified as a general partnership. If this is the case, all partners would share unlimited personal liability for the business. Common business structures that limit liability are corporations, limited liability partnerships, and limited liability companies. These structures provide the legal framework to set ownership and rights on paper. Having only one owner allows more flexibility in the entity choice. One owner may also decide to delay the entity formation and act as a sole proprietor until outside investors are willing to invest, a product is profitable, or employees are hired. Sole proprietors should carefully analyze the costs and benefits in pursuing a separate legal entity. Having employees creates many potential liabilities for businesses. Employees perform inherently risky things for employers: climb ladders, operate machinery, and perform other tasks. Insurance may cover things like injury, but policy maximums can quickly be reached and the owner held personally liable. Legal structures can help limit this risk and should be strongly considered when there are employees or even independent contractors. Limiting liability with a corporate or limited liability structure is ideal, but costly. Many California companies in the tech space register a corporation in Delaware and operate in California. In this example, the corporation will generally need to pay fees to Delaware, California, as well as file separate tax returns and hire an accountant. Delaware is a popular state to incorporate in because of the court system and laws. Using this legal structure may make it easier to attract investors and possibly sell a company. The necessity for outside investment is a very important factor when deciding on a business entity. If the business is seeking outside investment, ask other businesses and investors in the industry which structures are preferable. It is also valuable to seek legal counsel from firms that are experienced in your particular business type.
