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 Monday, October 20, 2008
End of the Year - Part 1
It's nearing the end of the year and holiday parties and family vacations are fast approaching. It's also a time we typically look back at this year's numbers and sales and examine strengths and weaknesses. What areas can the business make more money? What areas can we save money? A topic that is usually more important for new businesses, but one that is good to review for established ones, is the entity in which your business operates under. The right entity choice will help you respond to or take the best advantage of changes in law or changes in the nature of your current business. Entity choice greatly affects your legal liability for the entity's debts, liabilities, and other obligations and the extent to which creditors can reach or even go beyond business assets to reach your personal assets.
There are six basic business forms of for-profit businesses in the US: Sole Proprietorship, General Partnership, Limited Partnership, Limited Liability Partnership, Corporation, and Limited Liability Company (LLC). Each carry their own tax rules. Depending on the nature of your company, having your business under the appropriate entity can have a major impact on cash flow come tax time. For some useful knowledge on business legal organizational structures, check out this article.
Just as important as having your company under the right entity, is doing all business within that specified entity. Also, file and maintain the appropriate documents with the state your business is located. Late fees and penalties are a waste of resources. For corporations, LLC's, and partnerships, remaining "active" and "in good standing" with the Secretary of State is vital to secure funds from lending institutions. Check on your corporation's Secretary of State filing here.
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