Three Questions to Ask Yourself Before Starting A Business

After years of answering questions and helping people in the beginning stages of owning a business, we have discovered a bit of a pattern with the questions. Here are three things you will want to ask yourself before starting a new business.

Question 1: What Does Your Business Do?

The reason we ask this is to determine the type of income your business earns. Not all income is taxed the same way. If your income is earned through passive sources – rent, portfolio income, etc., it will be taxed differently than if your business provides a product or a service that you sell.

If you don’t make the right selection for your business’s income type, you could wind up paying more in tax than you need to.

Question 2: Where Do You Live?

We ask this question because where you live can make a difference to the kind of business structure you form. Some states have higher filing fees for certain types of structures, and some states have different tax arrangements for different business types. Knowing where you live helps us to narrow down your options.

We’ll also ask you about where your business is carried out, as that is a factor, too. For example, if your business is strictly done over the Internet, that may lead to a different business structure choice than a business with a physical storefront.

Question 3: How Much Does Your Business Earn?

This question again relates to taxes, and is specifically geared towards someone who receives earned income (that’s income from selling a product or providing a service). In this case, we’re looking to see how close your business is to certain income thresholds. As your income increases, we can find additional tax savings and benefit options for you by using different structures.

There are many variables when you’re structuring a business. That’s why it’s hard to go through a quick-service website. Unless you talk to someone who’s got some knowledge and experience on both the tax and the legal side, it’s hard to know what you don’t know. And that can leave you vulnerable.

Got questions? Contact us! We’re here for you.

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