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Tax Issues for Start Ups
Understandably business owners in the early phases of their business focus their attention on operating and managing their "core" business. As a result some very critical issues are often neglected or overlooked such as:
- selecting the most appropriate entity for conducting business,
- selecting the most appropriate state in which to incorporate and do business,
- having a federal and state tax identification number for tax purposes,
- publishing the required notice in the local newspaper,
- registering as a dealer for sales tax purposes,
- obtaining the correct insurance to protect not only business assets but personal assets, and
- reporting income and withholding income and employment taxes for employees.
But failure to attend to legal and compliance issues can result in financial penalties and heavy costs in terms of diverting time, attention, and resources to fixing a problem that could have been avoided through proper planning or oversight.
How We Can Help. We prevent legal and compliance problems from occurring and we assist the business in protecting itself against potential trouble. Our focus is to give our clients a level of comfort and confidence so that they can focus their attention and time on the "core" business decisions and issues that will ultimately make their businesses successful.
We view our role as more than just a legal advisor. We work with you to understand your business needs and objectives so that we can guide you through the legal issues and requirements in a way that promotes your business rather than interfere or slow down your business.
A sampling of the issues and matters we would attend to for you include:
- Determining the form of business entity in which to operate (sole proprietorship, S Corporation, LLC, or partnership). The type of business entity will determine who bears the liability for business decisions and debts, and how the income is taxed.
- Obtain the necessary business license and/or permits. Generally local law requires a county license and sometimes a city permit to operate a business. The type of business or industry often determines the type of license and permit needed.
- Determining in which state to form the business entity (this makes a big difference for determining scope of legal liability, and taxation).
- Attend to important IRS filing such as filing for LLC status or S Corporation status. Also filing to obtain an employer identification number.
- Provide a complete incorporation package that includes name search, drafting and filing the articles of incorporation, drafting the corporate bylaws and organizational resolutions, and providing stock certificates.
- Apply for state sales tax registration and state tax identification.
- Assist in identifying the appropriate insurance coverage and amount of coverage.
- Compliance with host of regulatory requirements such as unemployment insurance, workers' compensation, and OSHA requirements.
- Ensuring compliance with zoning requirements.
- Corporate governance issues (making sure your corporation is operated as a corporation and that it complies with corporate governance rules).
- Drafting employment agreement, noncompete agreements, and nondisclosure agreements.
- Drafting benefit plans such as profit-sharing, 401(k), health, or cafeteria plans, and
- Drafting stock buy-sell agreements (agreements that restrict transfers of stock among stockholders of closely held corporations).
Penalties and fines for start-ups and small business owners are much harder to absorb financially than for large companies. So the key to legal planning and advice is to "prevent" problems from happening, and this is our focus in providing advice and managing our clients' legal and compliance requirements.
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