The gig economy is strong. Many entrepreneurs, also known as “solopreneurs,” are considering the potential benefits of starting a business. In a recent segment of Law Matters, a public service television program that addresses a variety of topics that affect individuals and businesses, attorney David N. Bazar evaluated the advantages and disadvantages of the legal forms of business ownership.
Included in the considerations are the size and scope of business you are planning to grow or buy. Also, the relative level of control you want to maintain, or the amount of structure you are able to cope with, factor into determining the best business structure for you. Vulnerability to lawsuits, tax implications, anticipated profits (or loss), and your need to acquire funding are integral to the decision-making process.
Clearly, the sole proprietorship is the easiest entity. It is also the least expensive, least time-consuming from a reporting perspective, and easiest to dissolve. Offering complete control to the owner, this business form has widespread and immediate appeal. However, there are disadvantages, such as unlimited liability, meaning the owner is legally responsible for all debts involving the business. Raising capital, attracting high caliber employees and clients are also potential deterrents.
Partnerships, offering a variety of types of shared ownership, as well as corporations, such as subchapter S corporations and C corporations, and a hybrid, limited liability company (LLC), each present various tax advantages, varying degrees of operational flexibility, together with increased complexity in reporting, monitoring, and accounting. Limiting personal liability is often a primary factor in exploring these options.
At the outset, business owners need to research which licenses and registrations are needed, depending on the type of business you plan to engage in as well as the location of that business. In addition, state licenses are frequently required for a wide variety of occupations and a variety of products to be sold. Presumably the new business owner would already own, or at least be aware of these specific licenses. State tax, trade name, and employer registrations are also necessary.
Typically, each state offers website access to license and requirements. In Rhode Island, for example, forms are available at the Department of Business Regulation. Similar resources for new business start-ups are available in Massachusetts.
Many successful entrepreneurs have relied on bootstrapping - starting a business with little or no outside support and only personal savings, plus the first cash sales. There are abundant resources, forms and general business information on the internet to further support this approach.
Law Matters provides such resources during its question and answer television program, whenever it is appropriate. This is best used a guide to begin the process because online resources are not designed to address the specific issues each new business encounters. Focus on your business, enlist an attorney to anticipate the questions you had not considered, and very often, entirely avoid serious and costly oversights