Freelancing will only take you so far. If you want to build a truly sustainable business. One that have systems and teams in place and that IF needed, could operate on its own, generating money so that you can tour Europe, South America, the Bahamas or some other exotic location then establishing a proper business structure is a must.
A proper business structure is absolutely imperative to your health and wellness brand. The amount of paperwork necessary, the amount of taxes that you pay, and the overall responsibility that you have are all determined by your business structure.
To make it clear how thorough your business plan should be, I want to go over a few key things you must consider while creating a sound business structure for your health and wellness brand.
Choosing a Business Structure
There are four main types of business arrangements to select from, sole proprietor, a partnership, a corporation, or a limited liability company (LLC). So, before you choose one to operate your health and wellness business under, let’s go over each one to determine which one is a better fit…
Sole Proprietor: This is the most popular business structure and form of institution. Sole proprietorship gives you full control of the business which will also make you solely responsible for all financial obligations.
Partnership: Involving more than one person (usually two), a partnership takes some of the responsibility away from you. It means that you and your partner agree to share financial and managerial obligations for the business. Engaging in a partnership can be advantageous with the right partner.
Corporation: Once a business is a corporation, it is no longer at the sole responsibility of those who founded it but rather it is an entity in itself. The corporation will be taxed and all financial obligations are at the responsibility of the business, basically meaning that your corporation can be held liable for legal and financial responsibilities. Although it will require thorough record keeping, running a corporation is beneficial due to the lack of ownership and liability placed solely on the owners.
Limited Liability Company: Essentially, a limited liability company is a form of partnership that benefits from both partnership and corporation business structures. LLCs are increasing in acceptance among small business owners. While the owners are protected against personal liability, they will still endure profits and losses while the business itself isn’t taxed.
Registering Your Business
Your location and business structure determine how you’ll need to register your business. Determine those factors first, and registration becomes very straightforward.
For most small businesses, registering your business is as simple as recording your business name with state and local governments. If you’re conducting business under your legal name, you won’t need to register at all. By registering your business, you can take advantage of personal liability protection, legal benefits, and tax benefits.
Registering with Federal Agencies
You don’t have to register your business with a federal agency unless you’re filing to get a tax ID. For small businesses, it benefits them to register with a federal agency if they wish for trademark protection or tax-exempt status.
For example: If you want to trademark your business, brand or product name, file with the United States Patent and Trademark Office once you’ve formed your business.
If you want tax-exempt status for a nonprofit corporation, register your business as a tax-exempt entity with the IRS. To create an S corp, you’ll need to file form 2553 with the IRS.
Registering with State Agencies
If your business is an LLC, a corporation, partnership, or nonprofit corporation, you'll probably need to register with every state that you conduct business activities in.
Typically, you’re considered to be conducting business activities in a state when as follows:
Your business has a physical presence in the state.
You often have in-person meetings with clients in that particular state
A significant portion of your company’s revenue comes from that state
Any of your employees work in the state
Some states allow you to register online, and some states make you file paper documents in person or through the mail.
File for Foreign Qualifications
If your LLC, corporation, partnership, or nonprofit corporation conducts business activities in more than one state, you might need to form your business in one state and then file for foreign qualification in other states where your business is active.
Check with state offices to find out foreign qualification requirements and fees.
File State Documents and Fees
In most cases, the total cost to register your business will be less than $300, but fees vary depending on your state and business structure.
The information you’ll need to register with typically includes (dependent on your location and business structure):
Ownership, management structure, or directors
Registered agent information
Number and value of shares (if you’re a corporation)
Registering with Local Agencies
Typically, you won’t have to register with county or city governments to actually form your business. However, if your business is an LLC, a corporation, partnership, or nonprofit corporation, you might need to file for licenses and permits from the county or city.
Some counties and cities also require you to register your DBA — a trade name or a fictitious name — if you use one.
Local governments determine registration, licensing, and permitting requirements, so visit local government websites to find out what is needed or contact your local SBA or Chamber of Commerce.
Always Consult with the Necessary Professionals
As you move your business from the idea stage into implementation, you should really consider receiving advice from the experts.
The time to get input from various experts is before you register, before you open a bank account, and before you start taking on customers.
But who should you talk to? Below is a list of professionals you should include in the development of your business plan.
If you thought lawyers only came in handy during litigation, think again. Here are five specific ways a lawyer can assist you in setting up your business…
Helping you decide the best structure for your business to protect you from unwanted litigation and a heavy tax burden.
Discussing licensing and regulatory hurdles and advising you on ways to overcome them
Reviewing and writing contracts to protect your interests.
Advising you on the best strategies for protecting intellectual property, including trademarks and domain names.
Researching the legal advantages and disadvantages of assorted scenarios you may encounter in the early stages of your business.
Just as you should consult a lawyer, you should consult an accountant before going into business.
Five ways an accountant can advise you on your startup plans include:
Working with your attorney to establish the right business structure to minimize your tax burden and maximize profit potential
Checking your numbers to help you arrive at the best price point
Advising you on the best accounting practices for your situation
Assisting you in setting up your record system to make financial reporting easier
Teaching you how to analyze financial statements to make better business decisions for the long term
You should speak to your attorney and your accountant before talking to a banker, but you will need to engage a banker who understands business accounting. Some practical ways a banker can help you start your business are:
Reviewing your business plan to help you avoid potential pitfalls
Advising you on the processes involved in obtaining a loan and/or credit
Analyzing financial trends in your business sector and providing insight into how they may affect your business
Assisting you in setting up the proper financial instruments so you can manage your finances better
Working with you to calculate your break-even point and cash flow projections
It is much easier to make the right decisions regarding your health and wellness business when you have direction and guidance from professionals. It is worth the cost of hiring the right professionals to ensure that your business plan is carefully and effectively developed.
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