Is it time to simplify business incorporation?
Regular readers know that I listen to the podcast of American Public Radio’s Marketplace show. Last week, they had a singer, Jill Sobule, on who gave up on the big record companies and asked her fans to fund her next album.
It took just 6 weeks to raise $75K and off she went. However, she mentioned how difficult it is to set up small corporations- to split potential profits:
I mean originally what I wanted to do is figure out a way where everyone could have stocks in my PinkoRecords.com, but the way the laws are here for such a small business, it made it incredibly difficult. But next time I still want to figure how to do that.
Given the financial meltdown of so many “Big Corporations” that were “too big to fail”- it makes me wonder, are all the government paperwork, the tax rules, the “regulations” really needed? In forming a non-profit for our Veterans Business Group and the for-profit “South Park Social Capital” we had to hire lawyers, create tax IDs and set up complex articles of incorporation for a simple small business.
Could there be an easier way? Small business is what creates jobs, and while the country is facing record unemployment, maybe we need to take down the barriers to starting up small companies?
Simplification of processes is a sound business strategy- simplification of government regulation could be a powerful way to jump-start our economy.
Call it corporation EZ, and watch the economy grow.
Here’s a thought – why do corporations exist in the first place? In a true free market economy, their only functions are to create profit (at any cost) and to protect the owners from any real liability. We would not be in this economic mess if we could stop people from hiding behind corporate legalities and be truly accountable for their actions. AIG would be a lot more responsible, if those letters stood for something.
No more corporations = a lot less regulations.
For the sole proprietor who wants to work at what she enjoys and keep things simple, setting up an LLC is the way to go. The only thing simpler is to remain a sole-proprietorship. But doing so offers no protection for your personal assets. Operating as an LLC offers protection and simplicity. • The process for establishing an LLC can be done online by simply using one of the many online companies that provides this service or going directly to your state’s Secretary of State website. All that is required is a simple document called Articles of Organization which documents the name and address of your business, nature of business, and name and address of a registered agent. There is a registration fee determined by your state. • Next you will want to draft a simple operating agreement for your business. This helps secure your limited liability status. • Apply for EIN number for yourself and for your LLC if you have any employees. If you really like things simple, you will probably opt not to have employees, only contract labor. But if you do, file payroll tax reports using the LLC name and EIN. • Set up a simple but complete method of keeping accounting records. A separate business checking account is a simple start. Keeping your business separate from your personal is the objective. Treat your business like a business. • File Schedule C and Schedule SE along with your Form 1040 every year and pay your taxes. • File the appropriate forms to your state each year and pay your franchise taxes, if any. • Always file supporting documentation for everything you do and every transaction relating to your business. By your willingness to do these things, you will have established your business credibility with government agencies and given yourself and your family the added protection from any unforeseen events that may threaten your business or its assets. If you’re wondering whether you really need to go through all of this trouble, you certainly don’t have to. You’re not required to establish a Limited Liability company. But… Read more »