When you decide on getting a business license from your local county office, you’ll be asked to pick a business structure you want to operate as.
Some structures you can probably do on your own when getting a business license, but I would highly advise consulting with a lawyer or a CPA first before choosing which type of license you will file for.
Choosing a Legal Organization
The type of legal organization you choose will affect such things as how much paperwork you have to fill out, the types of tax forms you have to file, and who is ultimately responsible should your company get sued.
Here’s an overview of some types of license to consider:
Sole Proprietor: This type of unincorporated entity is the most common. You have full ownership, and full liability for anything that happens in with your company, including lawsuits, and all financial obligations. In terms of taxes, you have to pay self employment tax, depending on how much you are making, this can be done in quarterly or annual installments.
Partnership: Partnerships are like sole proprietorships, except that you have two or more people involved in the company that then split the profits or loss of the company. Each individual partner is then liable for paying self employment taxes.
Corporation, S Corporation, and Limited Liability Company: For these you definitely need the help of a lawyer and/or CPA. I can’t really get into explaining these because each one has complex rules and regulations attached to them. And I’m not a lawyer or CPA.
For more more information, you may consult the following page on the IRS website: Choosing a Business Structure
The other license you’ll have to get after settling on a legal organizational structure for your company is a tax ID number, so you can collect sales tax, and be able to buy supplies without being charged sales tax.
These are usually called seller’s permit, resale license, or a reseller’s license, depending on which state you live in. Usually when you go in to file your structural organization paperwork, you’ll be referred to the office that issues these permits.
Just be aware of what tax payment schedule they put you on, quarterly or yearly, and make sure you file these returns on time.