Structure Matters
Legal structure affects taxes, liability, and how you raise money. In the US, most small businesses start as an LLC or sole proprietorship; growth ventures may incorporate.
Common US Business Structures
| Structure | Liability | Tax |
|---|---|---|
| Sole proprietorship | Unlimited personal | Personal tax |
| LLC | Limited (with correct setup) | Pass-through or corporate |
| S-corp | Limited | Pass-through |
| C-corp | Limited | Double-taxed |
| Partnership | Varies | Pass-through |
Why LLC for Most
- Limited personal liability
- Pass-through taxation (once)
- Flexible management
- Moderate setup cost ($100-$500 by state)
- Widely understood
Key Setup Steps
- Choose a business name and verify availability
- Register LLC with your state (Secretary of State)
- Get an EIN from the IRS (free online)
- Open a business bank account
- Get licenses and permits (local/state)
- Set up basic bookkeeping (QuickBooks, Wave)
Tax Obligations
- Federal income tax (quarterly estimated)
- State income tax (varies)
- Self-employment tax (~15.3% on profit)
- Sales tax (if selling taxable goods)
- Payroll tax (if employees)
Contracts Matter
Put everything in writing:
- Customer agreements
- Supplier contracts
- Employment/contractor agreements
- Partnership terms
- Confidentiality (NDA) when appropriate
Professional Help
Invest in:
- An accountant (even once a year)
- A business lawyer (for major decisions)
- Insurance (general liability, professional)
Key takeaway: Proper legal structure, EIN, bank separation, and basic bookkeeping from day one saves vast trouble later.