How To Start My Own Woodworking Business

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How To Start My Own Woodworking Business

LLC vs. Sole Proprietorship vs. Corporation

You might be just starting out or you could be well on your journey, but regardless of where you are, how you legalize your business is one of the most crucial decisions that you’ll make. It impacts every little thing from how you file your taxes to how any type of possible troubles would be handled in court. So, saying that it is essential may even be an understatement.

The problem is that the typical small business owner does not understand the legal designations for business structures. And, why would you? Unless you studied to be a certified public accountant or an attorney, chances are that your world of expertise is well outside the world of LLCs and S Corps. There’s no alternative to guidance from a professional, however this will give you an excellent idea of what option is the best fit for both you and your business.

 

Sole Proprietorship vs. LLC vs. Corporation

What is a Sole Proprietorship?
A Sole Proprietorship is an unincorporated business entity with a solitary owner, who generally runs the business as an extension of themselves. Come tax season, if you opt to create a sole proprietorship, the profits and losses for your business will be evaluated through your personal income tax return. It is the least costly and most convenient business entity to create, and the IRS estimates that there are about 24 million businesses operating as sole proprietorships in the United States right now.

Being the least expensive and the simplest business entity has evident benefits, yet there is a price to pay. And, that price is liability. Because you and your business operate as one entity, you are directly responsible for all debts and accountability. This means that should your business fall under financial obligation or should somebody sue you, your personal assets like your house, car, and bank account will certainly be at risk.

This business entity is best for a person who is simply starting out and plans on working out of their residence. However, we encourage you to take the extra step and safeguard yourself by forming an LLC or a corporation. These business entities safeguard your assets and will help manage your finances come tax season. How To Start My Own Woodworking Business

 

What Is An LLC?
So, what is an LLC? Many people have actually heard the term before or are vaguely knowledgeable about what it means. Yet, when you’re starting out with your small business, you can’t afford to be vague. Making certain that you’re legally protected and designated in the proper way will save you money and time. LLCs provide what Sole Proprietorships can not, protection of personal assets and separation between the business owner and the business itself.

What Does LLC Mean?
An LLC is a Limited Liability Company. As the name suggests, they help safeguard the business owner’s personal assets from legal actions or financial troubles. There are a couple of various sorts of LLCs (more on that later), but for now, just know that this is the step we recommend if you’re seeking to legalize your small business. It’s not as complicated as forming a Corporation and it provides you protections that a sole proprietorship does not.

 

Single Member LLC vs. Multi Member LLC

As you may have guessed from their names, the most significant difference between a single-member LLC and a multi-member LLC is the number of business owners. But, that isn’t the only distinction between these two LLC formations, and you don’t need more than one business owner to file for a multi-member LLC (many people opt to make a spouse or family member their LLC partner). We’re not attorneys or CPAs, we’ve just been in the business for many years. So, we can’t determine which one is better for you, but watch the video above to get a better idea of which one will be best for you and your small business.

 

What is a Corporation

A corporation is a business entity owned by one or more investors and managed by a board. The most crucial point to keep in mind when forming a corporation is that the stockholders, directors, and employees of the company are safeguarded from potential liabilities, even ones that occur due to their own negligence.

And, come tax season, a corporation files as a totally separate entity from its owners, and is for that reason likely to have more tax breaks available. Just like LLCs, the different requirements for forming a corporation will differ state by state, but basically every state requires you to write corporate bylaws and file articles of incorporation.

Corporations are likewise normally required to register with the federal Securities and Exchange Commission, in order to issue shares of stock to shareholders, but smaller corporations with only a handful of shareholders can request an exemption from having to file. Because of this, forming a corporation is generally best for a business with multiple owners, all having invested considerable capital into the business. This is the most complicated and expensive.

 

LLC vs. S Corp

Forming an LLC or a corporation marks a graduation into the next step of your business. It’s the first big step you take to legalize your endeavor and shield your assets. But knowing which will be the most effective course for your business to grow into is difficult, especially if this is your first foray into forming a business entity.

An S Corp is a specific tax election, noted with the IRS. Corporations and LLCs can both be taxed as an S Corp. The IRS supports both C Corps and S Corps. To be an S Corp, you have to meet particular qualifications such as, have less than 100 investors, and so on. We offer the option for our LLC clients to file as an S Corp with the IRS after their state LLC filing. How To Start My Own Woodworking Business

How to Start An LLC or Corp

This is where we come in. We’ve talked about the lengthy and complicated filing procedures of forming a business entity. Whether you’re establishing a corporation or forming an LLC, you’re bound to encounter unforeseen roadblocks and red tape along the way. Our objective is to make forming a business entity easy and accessible, and we do. Our business formation services are completely online and provide a faster, less expensive way to get your small business up and running. If you are ready to legalize your business or just need more help to decide what is right for you, click the link below for more information.

LEGALIZE YOUR BUSINESS TODAY, AND PROTECT YOUR HARD EARNED ASSETS 

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