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Understanding The Differences Between An LLC And A Corporation

Many small business owners, when they decide that it is time for massive growth, consider turning their company into an LLC. An LLC or Limited Liability Company is often the first step for small business owners. Both the LLC and corporation are registered with the state that the business is in but it is important to understand that there are major differences between these two business types. Knowing these differences will help business owners to determine which of the two are best for their individual business.

An LLC is formed by one business owner or more. The owners are known as members and must file an Article or Organization. Profit and loss from the business are passed on to the business members or owners, depending on the specific share of membership that they have. A corporation on the other hand, is a separate legal entity that is formed by filing certain forms in the state where the business is located. Corporations must designate shareholders and each of these has a specified number of shares in the company. A Board of Directors is also essential with a corporation and the Board oversees the running of the business.

Corporations and LLCs do have some similarities. Tax deductions for businesses are the same or very close for both of these entities. Both also limit the liability that owners or shareholders are held responsible for regarding debts from the business. The liability for lawsuits against owners and shareholders is also limited with both a corporation and an LLC.

Determining which of these is best for your particular business will require a few considerations. While both have their benefits, they also have their drawbacks depending on your specific business. If you own a small business, forming an LLC is often the first step in growth. Corporations are often chosen when the business has grown substantially to the point of needing a Board of Directors to oversee the operations. For those who plan to grow to a global base, a corporation is often the better choice, however this again depends on the particular business in question as well as the benefits that the owner hopes to gain.

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When Taking On Business Debt Is Beneficial

There is an old saying that states you have to spend money in order to make money. This is certainly true of businesses and many business owners find themselves spending more than they are prepared to spend in order to keep their business running. While business debt is a common happening, there is such a thing as too much debt or debt that is incurred at the wrong time. You may feel that borrowing money for advertising is a good idea but it may turn out that your good idea is just happening at the wrong time. That said, there are times when taking on debt for your business is a good idea. Understanding this timing is crucial for the success of your company.
One thing to consider when you are thinking of taking on new debt is whether or not you are ready to offer more products to your customers. If you are, then you will likely need capital to purchase those products or the supplies to make them. This is one time when taking on a bit of debt can be beneficial as those new products can help you to quickly pay back that debt.

While it is not recommended that you take on debt every time you want to advertise, it is often necessary if you are planning to increase the way in which you advertise. If you are increasing your marketing efforts and adding a more surefire way to reach customers then you may need to consider taking on a bit of debt, which will pay off in the long run as you reach more people and expand your customer base. You don’t have to spend a lot of money on marketing and often, this can be done without taking on debt. However, if you are launching a significant marketing campaign, a bit of debt may be necessary.

There are other scenarios where taking on debt may be necessary, such as expanding your business operation or location or hiring employees. If you are unsure of whether or not taking on debt is going to actually help your business, weigh the pros and cons. Determine how beneficial it will be to go into debt for the purpose in question and if you cannot make a turnaround on that investment in a reasonable amount of time, forgo the debt for another option.

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The Benefits Of Forming An LLC

Many small business owners have begun to consider legal structure and the most popular legal entity that small business owners are choosing is the LLC or Limited Liability Company. An LLC offers a number of benefits from asset protection and tax perspectives. There are a number of things however that one should keep in mind when choosing to form an LLC.

An LLC has members who run the company or leave it to be run by a group of chosen managers. This is often a beneficial entity for those who want to use their business to purchase certain assets like real estate or other securities. Those who have the versatility to disperse their earnings and losses among members may also find forming an LLC to be beneficial.
An LLC ensures that profits and losses from the business circulate through to individual tax returns for the members of owners. This helps to prevent double taxation which is often found in corporations. You can also use the LLC to protect yourself and other members from lawsuit judgements which could take your assets. Small business owners are liable for judgements where as LLC members are limited in their liability for certain actions taken against the business.

The LLC is very popular among real estate investors and those who hold investment properties. There are a number of tax benefits that go along with forming an LLC, as well. Most choose to form an LLC based on the tax benefits and the legal protections alone. In many states, lenders to LLCs cannot take the ownership interest of the members, even for debts incurred after the LLC was formed. The assets owned by each member remain safe from legal action. Of course, there are drawbacks of forming an LLC, but most small business owners feel that the benefits outweigh the disadvantages. Those considering the formation of an LLC who are not sure if the benefits are worth the effort should speak with a qualified business consultant prior to the formation. Some may feel that forming a corporation is a much better choice, depending on the specific goals of the small business in question.

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The Top Tax Deductions For Small Businesses

Tax time is always a stressful time, particularly for small business owners. One thing that can help to relieve some of the tax pressure is knowing what tax deductions are available for small business owners and understanding whether or not one qualifies to claim these deductions. Small business owners are eligible for a number of tax deductions and unfortunately, many have no idea of the deductions that they are allowed to claim.

Car and truck expenses are one that many small business owners forget to claim. This deduction includes the costs of buying or operating a vehicle for business purposes. It is important to keep records of any purchases related to the operation of a company vehicle such as gas purchases, new tires, oil changes and other expenses.

Many small businesses, particularly home businesses, do not have the burden of wages for employees. Those that do however, are eligible for a tax deduction for these payments. Any payments made to employees, whether full or part time, are deductible on business taxes. This also includes any contract labor that is paid through the business.

Other expenses that can be deducted include renting office space, the cost of purchasing property for the business and any utilities that are used for the operation of that business. In the case of home businesses, rent or mortgage and utilities are limited to a percentage of use. Any office supplies and computer or other equipment is also tax deductible for businesses as is travel expenses and state and local taxes. Repairs for property or office equipment can be deducted, as well. Finally, many business owners neglect to take a portion of their insurance policy costs, which are tax deductible. The cost of the business owner’s policy as well as any malpractice or specialty insurance required by a business is tax deductible, for up to about half of the paid premiums. Small business owners who are unsure of precisely what they can deduct on their taxes should speak with a qualified accountant prior to filing to ensure that they are receiving all of the tax breaks that they are entitled to receive.

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Things To Consider When Working With A Startup

Getting into a business on the ground floor is an opportunity that appeals to many. When running a business however, it is vey easy to get in over one’s head. Starting a business can be difficult and even when there is help from others, seeing a business through from concept to success can be daunting. Those who are considering working with a startup business should bear a few things in mind, that could make the decision a bit easier and the process a bit less stressful.

Working with a startup can be very beneficial in a number of ways. Smaller businesses do tend to be more personalized in their dealings, which means they will cater more to the needs of those they are servicing. A business startup needs clients or customers and the best way to get them is to provide what those clients or customers want, often in a better way than larger businesses and for a smaller fee. Startups want their new clients to be satisfied and will often go out of their way to ensure that satisfaction. However, because they want new clients, some startups often go overboard, scheduling more than they can deliver.

In order to find a successful relationship with any startup business, it is important to conduct research. Check the quality of work that the company offers. For startups, this can be difficult but unless you are the very first client, there should be some record of other client dealings. Check online to see if reviews are available from past clients or customers.

Many businesses today rely on online reputation in order to grow. Research can be as simple as a quick internet search of the company and the company’s location to find reviews left by other clients. If a company has only one or two reviews and both of those are negative, you will know that perhaps it is best to go another route. Working with a startup company can be very beneficial but only if you know without a doubt that the company is reliable, secure and that is provides the actual services that it claims to provide.