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21-Jan-2014 The importance of choosing the right entity

Every business owner must choose the manner in which a new business will be conducted. An individual may conduct their business as a sole proprietorship. A sole proprietorship is the simplest and least expensive form of business operation, and should be considered for any new business.  


Before deciding on the sole proprietorship form of business, however, any new business owner should also explore the possibility of conducting business in the form of an entity, such as a corporation or a limited liability company (LLC). A corporation or LLC can provide: liability protection for the owner’s assets owned outside the entity, tax benefits and an organizational structure for businesses which have more than one owner.


In recent years, the LLC has become the preferred form of business entity, as it is less expensive to establish and maintain than is a corporation. However, certain types of businesses are better conducted in the form of a corporation.


Because tax considerations often dictate the choice of entity, the business owner’s accountant is in the best position to make a recommendation on the form of business entity.

Any business which has employees will have the obligation to withhold and pay payroll taxes, purchase workers’ compensation insurance, and comply with many other State and Federal requirements. It is important that the business owner thoroughly understands all of these issues before hiring the first employee for the new business.

A business owner should carefully select the name in which they conducts the new business. If the name selected is identical or similar to that of another business, the new business owner might be barred from using the name. Consequently, it is very important that the new business owner thoroughly research the desired name in order to make sure that it does not conflict with a name already in use by another business. The failure to adequately research the name for a new business can result in the need to change the name of the new business, and revamp all advertising. In order to research a name, visit the Nebraska Secretary of State’s website, sos.ne.gov, and do a corporate search. It is also a good idea to do a simple online search for the name you want to use to see if there are any other businesses with a similar name.

There are numerous issues to be considered when starting a new business. A new business owner should discuss all of these issues with their attorney, accountant, and insurance professional.

About the Author

Mike Sullivan
Sullivan Shoemaker PC, LLO, Hastings/Wahoo, Neb.

Mike Sullivan is one of Sullivan Shoemaker’s attorneys to be formally recognized as an outstanding lawyer by fellow attorneys. He practices in Hastings where he deals with business planning and LLC formation as well as estate planning, environmental law and municipal litigation. He has been practicing since 1974 and has assisted hundreds of clients as they establish and change business structures.  He is an advocate for business owners and gives time to speaking at various educational events.




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