A person who operates a business on their own is, by default, a sole proprietor. Rounding out the list is Indiana, with 512,438 small businesses employing 1.4 million people or 44.9% of the private workforce. If you're planning to start a business in one of the 15 states mentioned above, you're off to a good start to forming a low-cost LLC. Of course, California and Delaware's annual fee is disproportionately higher compared to that of the other 13 states.
Utah has a high quality of life, a low cost of living, and a flat 4.95% tax regardless of how much you earn, so it's a no-brainer when it comes to starting a new business. You'll need a business bank account and you'll sign documents and contracts on behalf of the company, not on behalf of yourself. You'll include your company's income and expenses in Schedule C of your personal tax return and you'll pay personal income tax on your profits. Sole proprietorships and limited liability companies (LLC) are two of the most common business structures for individuals and small businesses.
The mild climate and business-friendly tax policy play an important role in why many entrepreneurs seek an LLC in New Mexico. However, opening a different checking account for your company will make it easier to identify the company's expenses when it comes to filing your taxes. You'll operate your business like a company, you'll send payments from the company, and your customers will see the word “LLC” in your company name. For this reason, a business creditor cannot legally pursue your personal assets if your business is sued or unable to pay its debts. Sole proprietorships can be a good option for low-risk companies and owners who want to test their business idea before creating a more formal business.
With an LLC, it's important to keep your company's finances completely separate from personal ones. If a shareholder leaves the company or sells their shares, the C corporation can continue to do business with relative peace of mind. Visit the website of your state's secretary of state or other agency in charge of filing business requests for information, forms, and instructions specific to your state. People also consider opening an LLC when they reach a certain income threshold in their business and the additional fees and paperwork make tax sense.
LLCs can be a good option for medium or high-risk businesses, for owners with important personal assets they want to protect, and for owners who want to pay a lower tax rate than they would with a corporation. The structure of your company affects the amount you pay in taxes, your ability to raise money, the documentation you must file and your personal responsibility.
