Future Expectations and Your Small Business Structure

Future Expectations and Your Small Business Structure

You have had your brilliant idea for you new business – whether it’s software development or a boutique bakery – and now you need to know how to make it come to life. One of the most important things you will do for your new business will happen at the very beginning and concerns your future expectations and your small business structure.

Choosing your business structure has important implications for your future taxes, who owns your company, and who is responsible for any losses. Your business structure can mean the difference between paying employment taxes on everything you make and being able to take part of your business’s income as non-employment taxable dividends. Without the correct business structure and operations, you may fail to have limited liability and be personally liable for any damages caused by your business, you, or your workers. A Colorado attorney will help you choose the best business structure for your individual needs. Here is a brief summary of the most common small business types:

Sole Proprietorships

Sole Proprietorships are the most basic business type. If you are a freelancer, you probably are already a sole proprietor. There is little paperwork to be filed or forms to fill out, as it is the default status for running a business in the U.S. While simple, this business type comes with a lot of risk as there is no delineation between you as a person and you as a business. You are the only person responsible for the profits, and also for the loses. “This risk extends to any liabilities incurred because of employee actions” (SBA.gov).

Partnerships

If you are part of dynamic duo (or trio, or beyond), and you want that to continue into your business, a Partnership may appeal to you. The IRS sets the expectations of a Partnership as “Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.” There are different types of business structures housed under the umbrella of Partnership, each with different expectations for the length of the collaboration between parties, and the amount of liability and input for each party. The Small Business Administration has a helpful list of things you should discuss with your potential business partners before filling your paperwork. However, like a sole proprietor, partners typically have personal liability so careful consideration of this business structure should be had with an attorney before entering into it.

Limited Liability Company (LLC)

Limited Liability Companies (LLCs) is a business structure that does just that – limits your liability. It is a relatively new business structure – the first one was created in 1977. LLC laws are determined at the state level, so the state you form your LLC in matters. Due to the variation between states, LLCs can get a bit complicated, but Attorney Elizabeth Lewis is experienced in business formation and will help you navigate the formation of your LLC correctly. A few types of businesses generally cannot be LLCs, such as banks and insurance companies.

C-Corporations Taxes as C-Corporations

“From a legal standpoint, a corporation is a different person than the person or people who created it, and is therefore able to own property of its own, accrue its own profits, and be responsible for its own debts and civil liabilities.” (Upwork.com)
Most large businesses are Corporations, and a lot of legislation regarding Corporations has these large businesses in mind. A corporation taxed as a c-corporation may not be a good fit for your small business, as owning one tends to place a large burden on owners. Additionally, you may be taxed twice, since your corporation is a separate entity from yourself if you are a c-corp. It is a better a company type than the previously listed ones, however, if you plan on taking your company public.

Corporations and LLCs Taxed as S-Corporations

You can only have s-corporations if you have an LLC or corporation formed under state law. Many small businesses use them since they do not cause the double taxation problem. Not all companies can become S-Corporations however. From the IRS:

“To qualify for S corporation status, the corporation must meet the following requirements:

  • Have only allowable shareholders
  • May be individuals, certain trusts, and estates and
  • May not have owners that are partnerships, corporations or non-resident alien shareholders
  • Have no more than 100 shareholders
  • Have only one class of stock
  • Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations)”

The way you structure your business will have long lasting implications for your earnings, liability, and taxes. Improperly done filings can cost hundreds of thousands of dollars, and create stress year after year. It is best to consult an attorney before creating your business.

If you need help evaluating your future expectations or deciding on your small business structure, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

Sign Up For Our Email Newsletter

Privacy by SafeSubscribeSM





Small Business Work-Life Balance

Work-life balance is one of those issues we often hear about when it comes to employees, but what about small business owners and entrepreneurs?

Being a small business owner is challenging. It takes a lot of time and energy in order to keep the business going and growing. This can often lead to the assumption that the more time you put into something, namely, your business, then the more you will get out of it. Right? Maybe, maybe not, but you should try and be smart about it.

Consider this, studies show that the belief that multitasking is a powerful productivity tool is a myth. If you are in the middle of a personal, non-business task at home for example, then it might be a good idea to finish that up and then take care of that business matter later. Of course there are always exceptions, emergencies do happen, but do not automatically assume that making your business your number one priority will always lead you to better business results. If you come back to that business task with your full attention, you will likely complete it better and in less time.

Another way to help you obtain a better work-life balance would be to set aside one day out of the week (or maybe even the whole weekend if possible) to not do anything business-related. Think carefully about what day you choose, and make sure it is one that can work for you. For example, if your business gets an important delivery on Saturdays where there are commonly questions or problems with it, then that might not be a good day to choose. This can allow you to decompress, get some greater perspective, and then be ready to jump back into work more inspired and reinvigorated. Burnout is real, and taking steps to overcome it or prevent it now will reward you and your business over the long-term.

A common problem with work-life balance for small business owners is when you operate a home-based business. When you are in this situation, it can be hard to ever feel like you are off-the-clock and actually able to relax in your own home. If you are in this situation, consider limiting all of your business operations, equipment, inventory, et cetera, to one or two rooms in your home. If you have business items strewn across the house, you will likely find yourself thinking about work everywhere you go at home. Additionally, if you do all of your work at home, then it might be a good idea to keep a strict schedule for yourself of working hours. Get in a routine. Together, these tactics should train your brain to focus better on your business by concentrating both when and where you work in a common and predictable way for yourself.

Whatever your small business’ circumstances, it is crucial that you give it 100%, but you cannot do that if you are trying to work 100% of the time. We are all human after all, and we need to eat, sleep, get some rest, and spend some time with our families in order to be at our best on the job. So try and strive for a reasonable work-life balance for yourself, and you will likely be a better person and business owner for it. Lastly, remember not to feel guilty for taking some time out or else you likely will not experience the benefits of rest and balancing your work and the rest of your life. Just give it a try and see if it works for you.

If you need legal advice for your business, or are ready to start a new business of your own, then don’t hesitate to reach out and contact the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

Sign Up For Our Email Newsletter

Privacy by SafeSubscribeSM





Your Business Start-up To-Do List: How to Begin

A great idea is the genesis of any successful business. Many entrepreneurs know that “Aha!” moment when the thought “it would just be so much easier if I could get this note to stick to my page!” magically becomes the Post-it® note — now amplified from its original pale yellow to be available in rainbow colors, finishes, and sizes.

If you’re ready to start your business, you’re already in possession of an idea you think will succeed. The next thing on your Business Start-up To-Do List is research the market. Does your idea solve a problem, fulfill a need, or offer something desirable? Is there anything similar out there? Who are your competitors? What do you bring that’s fresh and different to the table?

In a parallel process to figuring out those elements, you also want to check in with yourself that this is the right time, mentally and physically, for you to undertake this exciting and challenging process.

A formal business plan is essential if you plan to seek funding from other sources, but even if you don’t, it’s a valuable tool that will clarify and solidify your idea. If you’re lucky enough not to require outside funding because you are using your own start-up funds, creating a simple plan will keep your goals up high and keep you on track as you reach your milestones.

This far in you will have thought about what your business structure will look like: is it an LLC? A sole proprietorship? You may choose one direction at the beginning and shift to something completely different as you get underway. Paperwork and, potentially, legal advice are a part of this process, as is choosing a name (and a domain name) that suits you and your business needs. You’ll want to make sure you are covered with the proper licenses, registrations, insurance, and permits in advance of your launch.

If your business is the brick-and-mortar variety, you’ll need to find a location that works. If it’s a home office, you’ll definitely want to plan how to shift your living space so that it doesn’t unbalance the flow of your home. In particular, if you live with other people, it’s beneficial to discuss any upcoming changes in advance so that everyone can be operating from the same vantage point. At least in theory!

Are you hiring employees? Working with contractors? What about your accounting structure, the backbone of every well-run business? The earlier in the process you address all the moving parts the better your business will function down the road at a high level.

With these things checked off your list, your new business is essentially ready to roll out. Marketing, promotions, perhaps a free offering, and a social media blitz should be on your radar. Stay connected to your business plan, which is a fluid document that should grow and morph with your business and function as a touchstone and an inspiration all in one.

Good luck!

If you need legal help, don’t hesitate to contact me at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com.

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

Sign Up For Our Email Newsletter

Privacy by SafeSubscribeSM





CO Ranked #4 State for Business by CNBC

This year’s rankings by CNBC for best states for business are in, and Colorado has taken the #4 spot. This comes as a significant, but not surprising, improvement from last year, where we discussed CO’s position at #8 in the CNBC rankings. Take a look at a complete breakdown of the rankings by state and categories here.

The rankings are conducted by scoring each state on 10 key categories including the following (in order starting with the most valuable to the overall score): Workforce, Cost of Doing Business, Infrastructure, Economy, Quality of Life, Technology & Innovation, Education, Business Friendliness, Cost of Living, and Access to Capital. Colorado managed to snag top ten rankings in four categories including: Economy (3rd), Quality of Life (9th), Tech & Innovation (5th), and Access to Capital (8th). Colorado was noted for it’s strong economy with a low unemployment rate of 4.3% and its innovation.

I was surprised to see that the Centennial State only got 9th in the quality of life category, especially since it tied with Iowa for this position. There is so much great outdoor recreation to explore here in Colorado, but you can scrutinize the methodology and rankings yourself with the methodological breakdown available here.

Overall, this news comes as yet another of the growing number of reasons and reports demonstrating that Colorado is a great place to live and a great place to do business. Now could be a great time for you to get started and put your entrepreneurial spirit to work.

If you a ready to start doing business in Colorado, then don’t hesitate to contact the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.

Employee Due Diligence

The next part of our series on Due Diligence will discuss Employee Due Diligence.

Now if the business you are looking to buy does not have any employees then this may be a simple process, but it may not be as simple as you would think. For example, the business that you are looking to buy may not have any employees per se, but they may instead utilize independent contractors, which may in fact be more properly classified as employees. This could bring up some significant liability and operational concerns going forward, so you will want to have these relationships carefully scrutinized by yourself and a knowledgeable attorney. This way you will know what you are getting into with this business purchase.

Some of the documents you should be looking for are:

  • Employment contracts
  • Independent contractor agreements
  • Non-Disclosure, Confidentiality, Intellectual Property and Non-Compete agreements
  • Any employment or Human Resources policies or handbooks
  • Documents showing any employee benefit plans such as (health insurance, retirement, bonuses, etc.)

All of these documents can bring up a variety of issues. You need to think about whether or not you want to continue using the same contractors and employees going forward. It may be a good idea for business continuity and transition, but it may also be a good time to make a change as well, especially if you have significant changes in mind or want to bring in key new staff of your own. The enforceability and terms of these agreements can have a substantial impact on the value and continuation of the business, and you need to be sure that you are getting a fair deal with the purchase.

Beyond the documents themselves, it may be a good idea to gauge employee feelings regarding an acquisition and possible change in management. If employees are not happy about such a large change, it could be a disaster in the making to take buy the business. Think carefully and don’t let the excitement of being an entrepreneur cloud your judgment. Trust experienced professional advisors to help you with deals of this significance.

If you need assistance with legal help and/or document drafting for your business sale, please contact the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.