No Result
View All Result
SUBMIT YOUR ARTICLES
  • Login
Saturday, October 25, 2025
TheAdviserMagazine.com
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
No Result
View All Result
TheAdviserMagazine.com
No Result
View All Result
Home IRS & Taxes

3 Steps to Legally Start Your Business |

by TheAdviserMagazine
2 months ago
in IRS & Taxes
Reading Time: 8 mins read
A A
3 Steps to Legally Start Your Business |
Share on FacebookShare on TwitterShare on LInkedIn


Starting a business can be incredibly rewarding…or incredibly risky if you set it up incorrectly.

Most new entrepreneurs are so eager to get going that they overlook the legal foundation. 

They skip steps, trust generic templates online, or worse—do everything in their personal name. 

That can lead to lawsuits, exorbitant tax bills, and business failure before they even gain momentum.

If you’re starting a business or launching any kind of venture, here are three legal steps you must follow to protect your assets, reduce taxes, and build something that lasts.

Prefer to watch? Check out the full video here: 3 Steps to Legally Start Your Business

What Is the First Step to Legally Starting a Small Business?

Step 1: Never do business in your own name—form an entity.

This is the single biggest mistake new entrepreneurs make.

Too many people operate as sole proprietorships—either in their own name or under a DBA (doing business as). While this may seem simple and fast, it’s one of the most dangerous ways to run a business.

Real-world example: A plumber operating under a DBA without proper liability protection had a job go wrong—water damage caused $1.5 million in destruction. Insurance wasn’t enough. The lawsuit targeted him directly, stripped him of everything, and forced him to make repayments for years.

Asset Protection for Small Business Owners: Why the Right Entity Matters

Asset protection for small business owners starts with one crucial step: forming a legal business entity. Whether you choose a Limited Liability Company (LLC), S-Corporation, or C-Corporation, these structures create a separate legal entity that shields your personal assets from business-related risks.

Without this separation, a lawsuit or unpaid business debt could expose your home, savings, and personal finances—a risk most entrepreneurs can’t afford to take.

The right business structure offers:

Legal separation between personal and business assets

Protection from lawsuits, collections, and liabilities

Fewer personal guarantees on contracts and leases

A strong foundation for business operations and tax planning

Think of it like a protective box—it contains your business’s risks while keeping your personal finances safe on the outside.

For many small business owners, an LLC taxed as an S-Corp offers the best mix of asset protection and tax advantages. If you’re planning to scale or bring on investors, a C-Corp may offer better long-term benefits.

Bottom line: Establishing the right legal entity is one of the smartest asset protection strategies you can implement from day one.

Request a free consultation with an Anderson Advisor

At Anderson Business Advisors, we’ve helped thousands of real estate investors avoid costly mistakes and navigate the complexities of asset protection, estate planning, and tax planning. In a free 45-minute consultation, our experts will provide personalized guidance to help you protect your assets, minimize risks, and maximize your financial benefits. ($750 Value)

How Do You Pick the Right Business Structure and Tax Treatment?

Step 2: Choose your tax classification strategically.

Choosing the wrong tax treatment can cost you thousands of dollars—every single year.

Let’s break this down with an example:

Let’s say your business earns $100,000 in profit.

Entity TypeEstimated Taxes OwedSole Proprietorship$15,300+ in self-employment taxes aloneS-CorporationCould save $8,000–$9,000 in taxes

Why the difference?

Sole proprietors pay 15.3% self-employment tax on all net profit

S-Corp owners can split income into salary + distributions, paying employment tax only on the salary portion

What Are the Tax Benefits of Different Entity Types?

Each entity type has its own tax perks:

Entity TypeCommon UsesKey Tax BenefitLLCFreelancers, service businesses, partnershipsFlexible taxation; profits pass through to ownersS-CorpConsultants, agencies, small active businessesLowers self-employment taxes on business incomeC-CorpStartups, tech companies, growth-focused businessesAccess to more deductions (e.g., healthcare) and lower corporate tax rates501(c)(3)Charities, nonprofit organizationsExempt from federal income tax

Your tax classification affects:

Your tax bracket

Employment taxes

Fringe benefits

Loss deductions

Audit risk

Bottom line: Always talk to a tax expert about the right combination of legal entity and tax treatment based on your income, losses, investors, and exit plans.

How Do I Keep My Business Legally Compliant?

Step 3: Stay compliant and keep your books clean.

Setting up an entity is only the beginning. If you don’t follow corporate formalities, courts can “pierce the veil”—treating your entity as if it doesn’t exist.

That’s bad news. It means:

You can still be sued personally

You lose the asset protection you thought you had

What Does Business Compliance Actually Involve?

You must:

Keep bank accounts and assets separate

Track business income and expenses separately

Maintain proper books and records (P&L, balance sheet, receipts)

File annual reports and pay state fees

Hold required annual meetings (if structured as a corporation)

Have operating agreements, bylaws, or partnership agreements in place

Failing to do this can result in personal responsibility for business debts—even if you’ve formed an entity. Courts call this “piercing the corporate veil,” and it can be financially devastating.

What to remember: If you don’t respect your business, the IRS and courts won’t either.

Also, don’t rely solely on your accountant. Many suggest sole proprietorships just to “keep it simple.” But simple doesn’t mean safe—and it doesn’t mean strategic.

What If I’m Confused About Where to Start?

You’re not alone. Whether starting your first business, launching a side hustle, or turning a passion into profit, the wrong first steps can lead to serious legal and tax problems down the road.

Instead of guessing, get guidance from strategists who have been setting up successful businesses for more than 25 years.

Click here to schedule a free 45-minute Strategy Session with a Senior Advisor at Anderson Advisors. We’ll help you:

Choose the right entity and tax setup for your business

Protect your personal assets from business risks

Understand where and how to register your business

Stay compliant, organized, and ready for growth

Frequently Asked Questions (FAQ)

Do I need a business license or permits to start a small business?

Yes. Most cities and counties require a business license to operate legally, even for home-based businesses, online sellers, or consultants. Check with your local government to verify zoning laws, registration requirements, and permit obligations.

What’s the best legal structure for a new small business?

For most entrepreneurs, an LLC is the best starting point. It offers liability protection, flexibility, and simple tax options. If you’re launching a scalable or investor-backed business, a C-Corporation may be a better fit. If you’re a solo operator, an LLC taxed as an S-Corp may reduce self-employment taxes.

Should I register my business in my home state or somewhere else?

Most small businesses should register in the state where they operate. A holding LLC can be used for further asset protection and can be useful for specific needs like anonymity, multiple investors, or national reach.

What taxes do small business owners need to pay?

It depends on your entity type, but most small businesses must pay:

Federal and state income taxes

Self-employment taxes (if operating as a sole prop or partnership)

Payroll taxes (if you hire employees)

Sales tax (if you sell taxable goods or services)

Working with a tax professional can help you minimize liability and plan ahead.

When should I create an LLC—before or after launching?

Always form your LLC before you start operations. Running your business before forming an entity exposes you to personal liability and can complicate taxes. If you’re already operating, form your entity as soon as possible to protect yourself moving forward.

Do I need a separate bank account for my business?

Yes. To stay compliant with IRS rules and maintain liability protection, you must keep your business and personal finances separate. Open a dedicated business bank account and credit card before making or receiving payments.

Can I run multiple businesses under one LLC?

You can, but it’s not always recommended. A lawsuit against one business can put all assets under the same LLC at risk. A safer strategy is to create separate LLCs or use a holding company structure, especially if the businesses are unrelated.

What is the difference between an LLC and an S-Corp?

An LLC is a legal structure, while an S-Corporation is a tax election. You form an LLC and elect S-Corp taxation to reduce self-employment taxes. This setup works well for service providers, freelancers, and consultants making at least $50,000/year.

Should I do market research before starting?

Absolutely. Whether you’re launching a product or service, market research helps you understand demand, pricing, competitors, and customer needs. It’s a key part of building a business that lasts.

Do I need a business plan to start a small business?

Yes, creating a business plan is one of the smartest things you can do before launching your business.

A business plan helps you:

Clarify your goals and vision

Understand your target market and competition

Plan your pricing, marketing, and operations

Forecast startup costs, revenue, and profitability

Attract investors, lenders, or business partners

You don’t need a 50-page document—a simple one-page plan that outlines your business model, funding needs, and growth strategy can help you stay focused and make better decisions from day one.

Whether you’re starting a service business, e-commerce store, or rental property operation, a business plan is your blueprint for success.

Final Thoughts: Start Smart, Start Legal

Launching a small business is exciting—but skipping the legal setup can cost you in the long run.

Here’s your checklist to legally start your business:

Form an entity. LLC, S-Corp, C-Corp—never operate in your own name.

Pick the right tax status. Save thousands with smart classification.

Stay compliant. Maintain books, file reports, and separate finances.

“You won’t know when you’ll step on a landmine—but if you set it up correctly from day one, you’ll never have to worry.”



Source link

Tags: BusinessLegallystartSteps
ShareTweetShare
Previous Post

How Our Execution Engine Powers Scalable Growth for GE and PE Firms

Next Post

Kansas City Fed’s Schmid shows hesitation about widely expected September rate cut

Related Posts

edit post
6 strategic steps to increase technology agility in indirect tax

6 strategic steps to increase technology agility in indirect tax

by TheAdviserMagazine
October 24, 2025
0

Indirect tax is one of the largest, least visible cash flows in a global enterprise. Cashflow often represents 10% or...

edit post
Personal Property Tax Exemption Measure

Personal Property Tax Exemption Measure

by TheAdviserMagazine
October 23, 2025
0

Property tax relief is on the minds of lawmakers and taxpayers around the nation.  Frequently, reducing the residential property taxA...

edit post
7 Red Flags the IRS Spots Fast |

7 Red Flags the IRS Spots Fast |

by TheAdviserMagazine
October 23, 2025
0

Why Does Bookkeeping Matter So Much for Landlords? For real estate investors, bookkeeping is more than tracking numbers—it’s about protecting...

edit post
Why S Corps Get Flagged for IRS Audits  

Why S Corps Get Flagged for IRS Audits  

by TheAdviserMagazine
October 23, 2025
0

Key Takeaways:  Unreasonable shareholder compensation is one of the most common S Corp audit triggers; the IRS flags owners who...

edit post
2025 Spanish Regional Tax Competitiveness Index

2025 Spanish Regional Tax Competitiveness Index

by TheAdviserMagazine
October 23, 2025
0

Below is an excerpt of the 2025 Spanish Regional TaxA tax is a mandatory payment or charge collected by local,...

edit post
7 Organizational Tips to Make Tax Filing Easy

7 Organizational Tips to Make Tax Filing Easy

by TheAdviserMagazine
October 22, 2025
0

There are often two types of tax filers: Those who neatly file their tax information and receipts away in color-coded...

Next Post
edit post
Kansas City Fed’s Schmid shows hesitation about widely expected September rate cut

Kansas City Fed's Schmid shows hesitation about widely expected September rate cut

edit post
Earnings Summary: Nordson reports double-digit sales, earnings growth for Q3

Earnings Summary: Nordson reports double-digit sales, earnings growth for Q3

  • Trending
  • Comments
  • Latest
edit post
77-year-old popular furniture retailer closes store locations

77-year-old popular furniture retailer closes store locations

October 18, 2025
edit post
Pennsylvania House of Representatives Rejects Update to Child Custody Laws

Pennsylvania House of Representatives Rejects Update to Child Custody Laws

October 7, 2025
edit post
What to Do When a Loved One Dies in North Carolina

What to Do When a Loved One Dies in North Carolina

October 8, 2025
edit post
Probate vs. Non-Probate Assets: What’s the Difference?

Probate vs. Non-Probate Assets: What’s the Difference?

October 17, 2025
edit post
California Attorney Pleads Guilty For Role In 2M Ponzi Scheme

California Attorney Pleads Guilty For Role In $912M Ponzi Scheme

October 15, 2025
edit post
Baby Boomers Are Flocking to This Florida Town — but Not for the Weather

Baby Boomers Are Flocking to This Florida Town — but Not for the Weather

October 9, 2025
edit post
Insiders Are Scooping Up Shares of a Miner, a Driller, and a Biotech

Insiders Are Scooping Up Shares of a Miner, a Driller, and a Biotech

0
edit post
Bharat Rasayan board okays stock split, issue of bonus shares

Bharat Rasayan board okays stock split, issue of bonus shares

0
edit post
Social Security Will Get a Bigger Bump in 2026 — but Don’t Get Too Excited

Social Security Will Get a Bigger Bump in 2026 — but Don’t Get Too Excited

0
edit post
Meet the billionaire couple who not only signed The Giving Pledge but actually delivered—donating nearly half their fortune while still alive

Meet the billionaire couple who not only signed The Giving Pledge but actually delivered—donating nearly half their fortune while still alive

0
edit post
How to Make 3% More Rent Automatically (Takes 5 Minutes) (Rookie Reply)

How to Make 3% More Rent Automatically (Takes 5 Minutes) (Rookie Reply)

0
edit post
Links 10/25/2025 | naked capitalism

Links 10/25/2025 | naked capitalism

0
edit post
Insiders Are Scooping Up Shares of a Miner, a Driller, and a Biotech

Insiders Are Scooping Up Shares of a Miner, a Driller, and a Biotech

October 25, 2025
edit post
Bharat Rasayan board okays stock split, issue of bonus shares

Bharat Rasayan board okays stock split, issue of bonus shares

October 25, 2025
edit post
Links 10/25/2025 | naked capitalism

Links 10/25/2025 | naked capitalism

October 25, 2025
edit post
Meet the billionaire couple who not only signed The Giving Pledge but actually delivered—donating nearly half their fortune while still alive

Meet the billionaire couple who not only signed The Giving Pledge but actually delivered—donating nearly half their fortune while still alive

October 25, 2025
edit post
A click lower, a tick higher

A click lower, a tick higher

October 25, 2025
edit post
How to Use Your Illinois Car Accident Report in Insurance Claims

How to Use Your Illinois Car Accident Report in Insurance Claims

October 25, 2025
The Adviser Magazine

The first and only national digital and print magazine that connects individuals, families, and businesses to Fee-Only financial advisers, accountants, attorneys and college guidance counselors.

CATEGORIES

  • 401k Plans
  • Business
  • College
  • Cryptocurrency
  • Economy
  • Estate Plans
  • Financial Planning
  • Investing
  • IRS & Taxes
  • Legal
  • Market Analysis
  • Markets
  • Medicare
  • Money
  • Personal Finance
  • Social Security
  • Startups
  • Stock Market
  • Trading

LATEST UPDATES

  • Insiders Are Scooping Up Shares of a Miner, a Driller, and a Biotech
  • Bharat Rasayan board okays stock split, issue of bonus shares
  • Links 10/25/2025 | naked capitalism
  • Our Great Privacy Policy
  • Terms of Use, Legal Notices & Disclosures
  • Contact us
  • About Us

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.