In: Accounting
Your client is looking to start a plumbing and heating business and is looking for advice on how to structure this new business entity. He will be the only employee and plans to purchase a van and basic tools to get started. What questions do you need to ask, and what are the major considerations that the client should make with respect to tax, ease of operation, future additional owners, and liability protection? Be sure to include which business form you would recommend (sole proprietorship, partnership, LLC, or corporation) and why you recommend this option as part of your answer.
Firstly i would recommend LLC Because Limited liability
companies are hybrid entities that combine the characteristics of a
corporation with those of a partnership or sole
proprietorship.
Questions i would ask:
1. As you will be the only employee, Do you have any subject
knowledge or experience in operating tools ?
2. What is your target market ? Will you be taking residential
customers only or corporate or commercial contracts along with
?
3. How much capital do you have to invest in ?
4. What is your long term goal ?
5. How long it will take you to break even ?
6. What will you name your business ?
After all these we will
start the process being:
STEP 1: Plan your Business:
A clear plan is essential for success as an entrepreneur.
STEP 2. Form a legal entity:
Establishing a legal business entity such as an LLC prevents you
from being personally liable if your plumbing business is sued.
Consider using a registered agent service to help protect your
privacy and stay compliant.
STEP 3. Register for taxes:
You will need to register for a variety of state and federal taxes
before you can open for business.
STEP 4. Open a business bank account:
Recording your various expenses and sources of income is critical
to understanding the financial performance of your business.
Keeping accurate and detailed accounts also greatly simplifies your
annual tax filing.
STEP 5. Set up business accounting:
Recording your various expenses and sources of income is critical
to understanding the financial performance of your business.
Keeping accurate and detailed accounts also greatly simplifies your
annual tax filing.
STEP 6. Obtain necessary permits and
licenses:
Failure to acquire necessary permits and licenses can result in
hefty fines, or even cause your business to be shut down.
STEP 7. Get Business Insurance:
Insurance is highly recommended for all business owners. If you
hire employees, workers compensation insurance may be a legal
requirement in your state.
STEP 8. Define your brand.:
Your brand is what your company stands for, as well as how your
business is perceived by the public. A strong brand will help your
business stand out from competitors.
STEP 9. Establish your Web Presence:
A business website allows customers to learn more about your
company and the products or services you offer. You can also use
social media to attract new clients or customers.
Tax
Guide
Single-Member LLCs are taxed by the IRS as “Disregarded
Entities.” Disregarded entities sound strange and
confusing, but it just means the IRS ignores the structure of your
business (i.e. the fact that it's a single-member LLC) and taxes
you like it does any individual. The LLC’s income is reported on
your personal tax return at the end of the year.
If the IRS treats my single-member LLC as a disregarded entity, do I still get the benefits of being an LLC?
Even though the IRS ignores the LLC structure when it comes to taxation, don’t worry—you still get the benefits of personal asset protection and deduction of business expenses.
To ensure you get these benefits, you should conduct your business in a formal way. Maintain Your LLC's Corporate Veil.