4 Myths You Should Be Aware of When Setting Up Your Small Business

Setting up a small business is not an easy endeavor, and you likely will encounter various legal questions and barriers along the way. An Aventura business transactions lawyer at Kramer Green can answer your legal questions and give you the advice you need as you work to establish your business. We can also provide ongoing counsel to keep you up to date on new laws, regulations, and policies that affect your business. Together, we will work to build and safeguard your business.

When an individual starts a business for the first time, they may have many misconceptions about what they need to do. Here are four common myths about setting up a small business:

1. Since I’m a sole proprietor, just starting out, and not making a profit, I don’t need to set up an LLC or any type of business entity.

You technically can operate a business without setting up a limited liability company (LLC) or another type of business structure, but when you do so, you put everything you own at risk. When you operate a sole proprietorship, there is no legal separation between business assets and personal assets. Likewise, business debts are your personal debts. As a result, if your business doesn’t go well, incurs large debts, or is sued, your home, your bank accounts, and any other property you own are at risk of being taken to satisfy your business losses.

2. Establishing a corporation or LLC will protect me from liability under all circumstances.

Operating your business as a corporation or an LLC separates your business assets from your personal assets. The business structure protects you and your personal assets from many types of liability. However, it is not foolproof, and there are still reasons to have other forms of protection for your personal assets. For instance, if you accidentally combine business and personal assets or sign a contract personally rather than on behalf of the company, creditors can try to come after you if your business fails.

Furthermore, you still need to have other safeguards in place to protect your business and yourself. For example, insurance on the building where you operate your business and the assets in that building is crucial. The fact that your business is a corporation will not insulate it from losses due to theft, fire, or floods. Without insurance, the only way for you to rebuild your business is to use your personal assets.

3. I need to incorporate my small business in Delaware.

Everyone talks about big companies incorporating in Delaware, or even Nevada or Wyoming. However, incorporating in one of these distant states is completely unnecessary and even inadvisable for your regular small business. Delaware has no state personal or corporate income taxes. However, incorporating in Delaware to avoid state taxes does you no good unless you operate your business there. No matter where you are incorporated, you still must pay taxes in the state where you operate your business.

Furthermore, in addition to incorporating out of state, you would have to register your business in your state of operations as a foreign business entity. This requirement can result in additional filing fees and administrative work that do not save you any money overall.

4. I don’t need to worry about taxes until tax time, and then my accountant will take care of everything.

Depending on what type of business you are operating and whether you have employees, you may need to be handling some tax issues on a regular basis, not just filing a tax return on April 15^th each year. For example, many small businesses are responsible for paying sales tax and payroll taxes. These taxes are ongoing responsibilities you must know how to handle from the first day you begin operating your business.

Furthermore, even though your accountant will give you tax advice and file tax returns for your business as needed, you still need to provide your accountant with the information to do so. If you haven’t previously operated a business, you should sit down with your accountant and find out what types of records and documentation you need to keep and maintain. By keeping orderly and proper records of necessary information from the outset of your business, you will make it much easier for yourself and your accountant when April 15^th does draw near.

Let Us Help Protect Your Small Business Interests Today

A Boca Raton business transactions attorney at Kramer, Green, Zuckerman, Greene & Buchsbaum, P.A. stands ready to help you create, grow, and operate your business by meeting all your legal business needs. Contact our office today at (954) 966-2112 or reach out to us online to schedule a time to discuss your legal business issues with our attorneys.