Q I am the founder of a small fitness website offering information and various personal training services. I am the only employee so far. At what point does incorporating my business and obtaining a business license become a good idea?
DEREK PERUO, FOUNDER
BODY BY D-ROCK
A There are a number of basic financial and legal decisions that you may need to make. My suggestion is to first build a good team around you, especially with your accountant and your attorney. They are key advisers who can help you plan, manage and protect your business.
Your advisers can help you design a legal business structure with which you are comfortable. This includes your legal liability questions to protect you and your entity's assets, while at the same time to maximize all tax benefits.
As the sole individual involved, you may look at various legal business entities including a sole proprietorship, a corporation, or even a single-member limited liability company. Each type offers its own legal and tax advantages and disadvantages.
Sole proprietorships are relatively easy to form and run and certainly have tax benefits, but you also expose yourself to personal liability. On the other hand, with a corporation you may have liability protection, but you also are subject to more record keeping and governmental regulation. With a corporation, you may also be subject to additional tax burdens.
Minnesota law (Minnesota Statutes Section 322B.105) expressly allows for the formation of a single-member limited liability company (LLC). An LLC is a kind of hybrid entity that has the legal protections of a corporation, but the tax benefits of a sole proprietorship.
Again, these are some basic ideas and not legal advice. I would strongly suggest you work with your legal and accounting team.
JOHN T. WENDT
DEPARTMENT OF ETHICS
AND BUSINESS LAW,
OPUS COLLEGE OF BUSINESS
UNIVERSITY OF ST. THOMAS