How many people go into business and never set up an entity structure? Thousands of business owners are sole proprietors which can be very costly. Setting up a business entity does not take a lot of money and is well worth it in the long run. The type of business structure you pick is determined on a variety and factors and it is best to ask your accountant which one is appropriate for you business. In most cases they will say and S corporation or an LLC. If you plan to raise capital a C corporation may be more appropriate.
Setting up your entity structure is an easy way to increase profits without doing much of anything. Once it is set up, you will be able to reap the rewards year after year.
If you do not think you can afford advice of a lawyer or accountant, than contact Legal Zoom. They will at least lead you in the right direction. You can even set up the entity with them directly. Even though there may be tax benefits to filing in other states, it is best to incorporate in the state in which you live. You accountant is familiar with the state laws and there is a better chance things will not be missed when filing.
Make sure your accounting books start clean and stay clean. The worst thing you can do is start mixing business and pleasure. It creates a nightmare not only for you, but if you are audited, it can create havoc in your life.
Take time to set up categories and your accounting books correctly from the start. Have business systems in place that ensure that all of your bases are covered and you are not scrambling when it is tax time. Even have a separate credit card for all business expenses. Label receipts and file them on a regular basis.
This all sounds so elementary, but then again, most people do not take the time to set things up properly.
If you have questions after your initial set up, do not hesitate to contact your accountant and/or bookkeeper to ask them questions. And that brings up a very good point, never hire an accountant or bookkeeper that charges you to ask questions. Some firms are set up similar to a lawyer’s office. Too many surprises happen this way. Think of your accountant as a mentor.