As a new entrepreneur and independent travel agent, you need to register your business. However, before you get started, you have to figure out how you want to structure it. There are many different options so it can be hard to figure out what is best for you and your business.
Before you register your business, you need to decide what type of business you are going to have. Your options include:
Sole proprietor
Corporation
Partnership
Limited liability company, otherwise known as an LLC
So, how can you choose? It is going to depend on the type of business you have, as well as your assets and the liability risk that you face.
Here are some reasons why you may want to start a sole proprietorship:
Easy to get started. Starting a sole proprietorship is really easy. You can use your own name and Social Security number to get started. You can use this information to get the permits and licenses that you need to start your business.
You alone are in charge of your business. When you are a sole proprietor, you can decide how you want to run your business. You can choose the jobs that you want to take and pass on the ones that aren't going to be worth it.
And you get the income that comes with it. When you are a sole proprietor, you get all of the income that you make (after paying taxes). You don't have to split your income with anyone else.
Here are some reasons why you may want to start a corporation:
Credibility. As soon as your business becomes a corporation, you gain credibility. People are more likely to work with businesses that are a corporation than those that are not.
Best way to get financing. If you are going to need help financing your business, you may need to start a corporation. You can sell non-voting shares, which allows you to raise money, without giving over control to everyone who helps you. You also can sell stock to help raise money when needed.
Have different types of owners. When you start a corporation, you can have silent partners, who will help with financing (and get a part of the profit), as well as partners who can help you run your business.
Ability to offer benefits for employees. Corporations are able to offer benefits for their employees, such as health insurance, and deduct it as an expense. LLCs and other businesses aren't able to do so.
Here are some reasons why you may want to start a partnership:
Started privately, between partners. It is easy to set up a partnership because it is formed with an agreement between the partners. You won't have to register your business partnership with the state.
The partnership is not taxed. Instead, partners are taxed individually on their personal tax returns, depending on their actual profits and losses that they occur from the business. You won't be required to create a tax return for the business.
Easy to end the partnership. Just like it is easy to get started, it is easy to dissolve a partnership. As long as one partner is ready to stop, the partnership can change or dissolve, depending on what everyone wants.
Here are some reasons why you may want to start a limited liability corporation:
Cheaper than forming a corporation. It is much cheaper to start an LLC than a corporation and it still gives you plenty of the same benefits.
Liability protection. If you have a business that has plenty of risk, you may want to start an LLC in order to protect your personal assets. You won't be held liable for any debts and losses that your company incurs.
You are still in control of your business. You are able to control your business, the way that you want while protecting yourself legally.
More official. Many believe that having an LLC behind your business name can make your business seem more official. People may be more likely to work with you because your business looks more legitimate or serious.
The best way to decide how to structure your business is to talk to a professional. An accountant will be able to discuss your business ideas so that you can see what your different options are. They will help you figure out what will work best so that you know you are doing it correctly.
Your tax professional will also be able to help you throughout the entire process of registering your business so that it is protected fully.
Once you decide how you want to register your business, it is time to do so. Here are some tips to help you get started.
Register your business name. If you aren't operating under your own name (and using your Social Security number), you are going to need to file a DBA. This stands for doing business as.
Then, you need to register with the IRS. You will receive an Employer Identification Number (EIN), which you will use like a Social Security number for your business. You need it in order to file your taxes for your business.
After that is done, you will need to register your business with the state and local agencies.
Make sure that you have the necessary licenses and permits that you will need. The U.S. Small Business Administration has a website so you can easily find out what permits and licenses that you may need.
Once you have gone through all of the steps above, it is time to get started! You can open your doors and start making money. You are on your way to running a successful business and working for yourself. If you’ve already been working as a solopreneur for a while, it’s never too late to meet with a tax professional and decide how to register your business.