Step 8: On Tying the Knot: How to Register a Business
Isn’t it strange how easy it is to get married and how hard it is to get divorced? You can tie the knot in Sin City on a drunken whim, but if you want to undo last night’s mistake you’ll be dealing with more than a bad hangover–we’re talking months of paperwork and thousands in attorney fees. Believe it or not, registering and liquidating a business works in a similar way. Fortunately, today we get to talk about the happier of the two processes–registering a business.
Just like getting married, before registering a business there are a few decisions you need to make about your relationship…I mean business. You’ll need to ask yourself who is going to be responsible for assets and liabilities, what kind of power dynamic will work best, and how much operational flexibility is ideal. Unlike marriage, however, answering these questions is made easier by the the various predefined business types you have to choose from.
Here are the most popular types of businesses:
- Sole Proprietorship – the most basic type of business to establish. You alone own the company and are responsible for its assets and liabilities.
- Limited Liability Company – An LLC is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. This is the most popular type of business.
- Cooperative – People form cooperatives to meet a collective need or to provide a service that benefits all member-owners.
- Corporation – A corporation is more complex and generally suggested for larger, established companies with multiple employees.
- Partnership – There are several different types of partnerships, which depend on the nature of the arrangement and partner responsibility for the business.
- S Corporation – An S corporation is similar to a C corporation but you are taxed only on the personal level.
In the state of Virginia, where The Third Place will be located, an LLC can be registered online in 10 minutes for $100! This is one of the easiest states to do so, making Virginia the Las Vegas wedding equivalent for business registration.
Once you’ve registered your business, there’s still work to do. The next steps will be to open a business bank account, register for a bookkeeping software (we prefer Xero, over QuickBooks), and reconcile all ongoing transactions. And one final word of advice – before you are begin the process of opening and operating, make sure that you have secured a lawyer, an accountant, a banker and an insurance agent, who we fondly refer to as the “four friends of business.” They’ll be there to help you out, offer you advice, and even let you sleep on their couch when things aren’t going well at home. Just kidding about that last one, but you get the point. In any relationship, whether it be professional or personal, having a dedicated and trustworthy support team is an absolute must.
On a side note, we (along with our lawyer) can’t seem to figure out why someone might opt to open a Sole Proprietorship rather than an LLC, so if anyone has an answer please share it in the comments! Also, if you want to learn more about registering a business, make sure you check out the Small Business Administration website
Vitaliy & Kseniia