Business Formation
The type of business you decide to form will
have a major impact on the debt obligation, profits, taxes, and other
aspects of your business. There are different kinds of business models
including DBA, sole proprietorship, business partnership, and
husband-wife partnership.
DBA
DBA stands for "doing your business as." This is some kind of label
that allows you to run your company under an assumed name. When you file
a DBA, you can start a completely different business or expand your
current business under the same name. So, DBA can save you a lot of
start-up costs. Filing a DBA will cost you anything between $10 and $50,
making it the most beneficial business-related expense you can incur.
All you need to do to file a DBA is to contact your local county clerk's
office. They will guide you through the entire process.
Sole Proprietorship
A business that is started and managed by only one person is called a
sole proprietorship. It is the simplest form of business and can be set
up with little effort. Businesses that do not require a vast amount of
capital and varied skills can be started as a sole proprietorship. In
most cases, you can get started with your business without registration.
Some might have to register their business with their secretary of
state. Sole proprietors enjoy a lot of benefits. There is hardly any
paperwork involved for starting the business. There are no extra
expenses like start-up fee. A sole proprietorship business is also
eligible for exclusive tax benefits. It is important to note that a sole
proprietor and his business are considered a single entity by the law.
Business Partnership
When two or more persons come together to run a business, a business
partnership is formed. A partnership agreement lays down the
responsibility for each partner. The work burden of an individual is
considerably reduced and the risk involved in the business need not be
borne by a single person. The profits are shared by all the partners in
an equal ratio, unless otherwise agreed. A business partnership could be
of various kinds and usually the liability and profit ratio vary with
the kind of partnership that is formed. For instance, a limited
partner's personal property cannot be used for paying business debts.
Husband-Wife Partnership
When you operate your business with your spouse, it is called a
husband-wife partnership. The business can gain a lot if it is a
husband-wife partnership, especially in terms of tax benefits. You can
file all your incomes and expenses under your personal tax return like a
sole proprietor. You can do away with all the complicated tax forms
that are involved in a normal business partnership. Another benefit that
you get when your spouse is your business partner is the reduced tax
burden. Both of you do not have to pay self-employment tax separately.
There are no security concerns as well because all the assets are joint
assets, and there are very slim chances for default by both parties.
