Has your client approached you for advice on forming a new business entity? Perhaps you are familiar with the nature of the business’s management but lost in matters regarding entity formation. Creating a new business has several procedures beyond having a perfect idea. In this article, we discuss 3 tips you can use when forming a new business entity.
Select a Name and Location
While it may seem obvious, name selection is a critical part of any business. Ensure that you conduct an online search to confirm if another business operates under the name. Depending on the nature of the business, you can also file for a federal trademark to protect the business. It’s also crucial to determine whether you need a physical location. If you settle for a leased office, keep your costs low at the beginning and expand as the business picks up.
Choose a Legal Business Structure
Before you can register a business, you need to decide how to incorporate it. The structure of the business affects the registration process, costs, taxes, liabilities, and finances. The most popular business structures are sole proprietorships, partnerships, corporations, and limited liability companies (LLCs).
While sole proprietorship works well for small businesses, it restricts decision making to one individual. It also shifts all the liability to the owner. A corporation, on the other hand, separates personal liability from corporate liability. All structures have their benefits and risks, and understanding them will help you advise the client accordingly.
Perform a Break-Even Analysis
It’s never too early to crunch the numbers in trade. A break-even analysis will help you determine if the business will be profitable. It also helps you advise the client on profit management and strategies. Once you do the math, you can establish the minimum performance for the business, beyond which losses occur.
How Can Filejet Help?
With Filejet, you can collect, process, and file all your client’s documents conveniently during the business formation process. For more information, contact Filejet today!