I’ve often searched for “no bloat” guides on starting businesses and learned quickly there isn’t much that isn’t full of useless facts, stories or other fluff that isn’t particularly useful. It seemed like you need to scan 100 or more pages of text to find just one tiny nugget of truly impactful information.
For years I’ve made notes on various business’s and have finally taken it upon myself to turn this into something others can benefit from. So many mistakes could have been avoided had there been some source of solid information -i.e. a mentor of sorts that will help you detect the pitfalls and begin with some things that are proven to work time and time again.
So what follows are my notes and experiences turned into a condensed set of rapid-fire notes to get you started in the right way with your new business.
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This is a fundamental start-up business decision and once chosen is hard to undo. Your options typically are a corporation, an S corporation, an LLC, partnership (general and limited) and a sole proprietorship. Lots of tax implications involved with your choice here but take it from me the liability drawbacks of partnerships and proprietorship’s are so high that I would say in most cases they should be avoided.
a. Determine the state you plan to legally start your business in. This does not necessarily need to be the state you actually operate the business. I’ll get into NEXUS implications in a later article but here is a hint – LLC’s and S Corps formed in states like Nevada and Delaware have considerable advantages over most states.
One thing to keep in mind are the fees for creation of entities in Nevada and Delaware. In recent years they have increased their formation fees as well as the dreaded annual report fee typically provided by your registered agent. These can be $400+ for formation and $350/year for annual reports from your registered agent.
Here is a little-known fact. Wyoming is an alternative state to start a new business. The laws are similar to Nevada and Delaware but both the registration and annual fees are just a fraction of other popular states. It’s important to remember your business does not need to actually be located in the state where your sales occur. In most cases it is best to choose an entity state based on the protections you are afforded.
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