Many business owners, who start small, dream of huge success and growth. However, higher profits and expansion do no mean the end of your small business status or the control you have over the product/service you set out to provide. With a broad definition and many variables, a small business may be classified as a company with under $7 million in sales and up to 500 or more employees. Basically, there is plenty of room to grow while remaining a small business. Choosing the best business structure is critical to the success of your small business regardless of your future goals. A small business attorney will help you with every aspect of your business formation and transformation. This post will discuss the benefits of being labeled “small” and review the most common types of business structure for small businesses.
3 Small Business Benefits
As a Small Business Owner, You Are in Good Company
According to the U.S. Census Bureau, there are nearly 30 million small businesses in America. In Colorado, small businesses make up 97 percent of all businesses. A Wall Street Journal article says “small business is big business,” citing that small business employs about half of the people in the workforce and accounts for 86 percent of companies with 500 or more employees. Technology has streamlined everything from bookkeeping and payroll to staffing and marketing, making it possible for small business owners to operate like big corporations. While hefty competition is viewed as a deterrent to some, others see marketplace opportunity and a culture of collaboration.
You Can Find Your Niche
The limitation in scope and reach for some small businesses lends itself to niche marketing. Your small business enables you to focus on a portion of the market that other businesses overlook. This gives you opportunities for specialization and integration into your community. As Denver has experienced an influx of migrating millennials, niche products and services are in demand more than ever. This is a generation that monitors and shares via social media on a daily basis and, in turn, shapes and influences where people shop, eat, and buy.
You are Creating Your Legacy
Perhaps this is why you started your small business – to not only provide for your family, but to leave something for them, whether it be the actual business or the values it embodied. Staying “small” can also afford you more time with the people who matter most and opportunities to engage with the community where you live and work.
Start your Small Business Right – Business Entity Formation
Each of the three most common business structures has its own characteristics and limitations, affecting your liability, taxes, and income. As these have been covered in previous blog posts, here is a brief review.
One of the most prevalent and simple business forms, a sole proprietorship is an unincorporated business owned by one person. This is an inexpensive and informal way to conduct a small business. A freelance photographer or someone who handcrafts jewelry, for example, would be considered sole proprietors. The main drawback is that you assume full personal liability for your business.
When there are two or more partners who own the business, it is a partnership. This can be a husband and wife who share everything equally (general partnership), or it can be you and a friend who only contributes and receives partial profit (limited partnership). As with sole proprietorships, there is more flexibility and control than in a corporation as partners are able to define their relationship and roles. Partnerships, however, have more ability to raise capital than a proprietorship.
A corporation is a legal entity that is independent of its owners and has its own legal rights. There are different types of corporations (C corp, S corp, B corp), and even a sole proprietor can incorporate. In a corporate limited liability, shareholders are only at risk for the amount of money or other investment they make in the corporation. Investors are willing to invest in a corporation more than any other type of business organization because of the ability to protect personal assets from the creditors of a corporation. There are restrictions associated with the different corporations, and not all small businesses qualify for each type.
Your Denver-based small business attorney will help you select the right structure for your small business today and ensure it is still working for you in the future. If you need help with your business formation, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: firstname.lastname@example.org
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Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80246
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