You have a choice to make on how best to legally organize your business, as a sole trader, partnership or limited company. Broadly speaking sole trader is the simplest and limited company and the most complex way of setting up a business, but each of the three methods provides advantages and disadvantages according to the type of business you operate. A professional advisor will be able to give you more detailed advice on which will be the most suitable arrangement for you. However, the following guidelines I have provided will help you in the early stages.
Sole Trader
The sole trader embodies the spirit of the small business person. It is you, on your own or just making a go of it. The bookkeeping and accounting side should be very straightforward, although it is always helpful to seek professional advice. You are however, totally responsible for any liabilities you incur in your business, which means you're personal as well as your business assets may be at risk.
Partnership
A partnership shares many similar characteristics of a sole trader in that it is simple to establish, but as its name implies, it involves two or more people jointly running the business.
Although you do not have to formally register a partnership, I strongly advise that you draw a partnership agreement with the help of a professional. Among other things this will outline exactly who has put what into the partnership, how the profits will be split, who does what work, and what happens if the business is wound up.
On top of this legal basis, you must ensure that you can trust your partner(s), because in theory at least each partner is personally liable for all debts incurred by the business. Through no fault of you own, you may find yourself paying off substantial debts, which your partner(s) may have has run up without telling you.
Limited company
A limited company is different from a sole trader or partnership in that it is an entity separate from its owners. As such, you would not usually be personally liable for its debts because normally creditors can claim only the assets of the business (although you may be asked to give personal guarantee on certain loans and liabilities)
A limited company is a little more involved to create, and I also strongly advise that if you wish to set up a limited company you seek the advice of a professional (an attorney or accountant). You must register the company and have properly audited annual accounts.
Limited companies have the following characteristics and requirements:
(a)They need to be registered
(b)They are owned by shareholders
(c)They are managed by directors who are appointed by shareholders. In the majority of small limited companies the directors are also the shareholders.
(d) The rules for managing the company, including what the business can undertake and the power of directors are set out in a document called the ?Memorandum of Articles of Association.?
As in a partnership, a limited company will often involve working with other people and again it is vitally important that you can trust your colleagues and will be able to enjoy working with them. Should the relationship breakdown, a business can be severely damaged, or even brought to its knees, while people try to untangle themselves.
Legal Form Of Business
1.Keep meticulous records of income and expenses. If you present paintings that you either painted or acquired, you can attempt to sell them. Even if you do not sell a single one, keep records of your expenses, they can be used as a tax write-off. See http://www.incparadise.com
2.Maintain evidence that you have a profit motive. The IRS defines a true business to be one that is geared to making a profit. That does not mean you have to actually make a profit. Say your business is betting on the horses. If you set up careful accountant records of your bets and your wins, you can present this as a business, even if you overall have losses for years in a row. Some research companies that receive outside investment can go for five or ten years without showing a profit, yet considered totally legitimate businesses with a profit motive. It's assumed that many businesses can have long and even extremely long start-off times.
3.Be able to write-off many household expenses as tax deductions. Take for example, someone running a transcription service for doctors, lawyers or bankers. They set up a room in their home to listen to cassette tapes or audio computer files, such as MP3s, and transcribe them for a fee. They have to buy a Personal Computer, a PC to process all this data. They need a telephone line, a DSL Internet line, a fax machine, and some US Mail communications to run their business. Part of their household rent, mortgage, heat, and electricity can be looked at as possible business expenses. Please consult your accountant, lawyer or tax advisor. This can even be a part-time job. Keep your day job if that suits you, you can still reap the rewards in tax deductions.
4.Take courses to improve your business abilities. Another potential tax write-off is the education that you'll need to carry out this part-time or full-time business. Do you need computer courses to make it possible to carry out your tasks? You may need to learn other skills. Many businesses require writing ability for ads and other business written materials. You may even need to take legal courses. As one of my business instructors reminded me, enjoy the benefits of having your own business. The tax code was written by people who had their own business, and who generally believed in people having their own business as a positive factor in society.
There is no need to spend hundreds of dollars incorporating yourself, at least not when you first get started. You may want to form an LLC, a limited liability company, in order to make sure that your personal asset, your home and property are protected in the event of lawsuits. Still, this is not required by the Internal Revenue Service (IRS).
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Makabongwe Maseko has sinced written about articles on various topics from Business Plan, Personal Desktop and Stock. Makabongwe Maseko offers advice on the business industry on his weblog "Online Marketing Business Opportunity". To get more information and tips on business matters visit:. Makabongwe Maseko's top article generates over 2900 views. to your Favourites.
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