Dispelling Business Formation Myths
Aug. 31, 2022
The process of starting a business can feel both overwhelming and intimidating. While considerable information about business formation is available online, not everything you read is true. Unfortunately, many people are misled by myths and misconceptions about business formation and end up making mistakes when starting a business.
To distinguish fact from fiction when starting a business, you might want to speak with a knowledgeable business law attorney. At the Law Offices of Jerry J Goldstein, we help people navigate the process of starting a business and ensure that our clients do not fall prey to business formation myths. From our office in Palm Desert, California, we proudly serve clients throughout the Coachella Valley, including but not limited to Riverside, Los Angeles, San Bernardino, San Diego, and Orange counties.
Business Formation Myths That Aren’t Really True
If you have been searching online for information about starting a business, you have probably read a lot of contradictory things. Below, we dispel some of the most common myths about business formation:
You do not need to worry about choosing a business entity if you do not have a large business. That is not correct. Choosing a business entity is crucial for any business, regardless of its size. The choice of the business structure will affect nearly everything, including but not limited to taxation, day-to-day operations, personal liability, and much more.
You cannot form or operate a business if you are not a U.S. citizen. There is no requirement to be a citizen of the United States to form or operate a business. In fact, the business formation process for non-citizens is the same as it is for U.S. citizens. However, you still must have a visa if you want to work legally in the United States. In addition, you will need to obtain a Tax Identification Number ("TIN"), the equivalent of a Social Security Number for an individual who is not a citizen of the United States.
Forming a business can provide absolute liability. Wrong. While forming a business can limit your personal liability and protect you from many possible risks, incorporation or organization of a limited liability company alone does not provide absolute liability. The only way to avoid personal liability for the debts of your business is to fully understand requirements as to how you operate your business to provide personal liability protection.
You will not need to pay taxes if you form a business in another state. In the context of taxation, it does not matter where you form your business. What matters is where you operate your company. Accordingly, even if you incorporate your business in Nevada but live and operate your company in California, you would still be required to pay taxes in California.
You cannot have employees if you form a sole proprietorship. A common misconception about forming a sole proprietorship is that you cannot have employees. If you are a sole proprietor, you can employ workers.
You do not need an attorney to form a business. Trying to form a business without an attorney is like trying to drive a vehicle with flat tires. Technically, you can get to your destination, but doing so can be a terrible idea. If you do not have an attorney on your side, you may not be aware of all the business organization and operation laws and regulations in your state.
A skilled business attorney can guide you through the process of starting a business, prepare the necessary paperwork, and ensure that you avoid any potential issues, pitfalls, and unforeseen obstacles.
The Law Offices of Jerry J Goldstein Can Help
If you are considering starting your own business, it is imperative that you seek guidance from a knowledgeable business law attorney. At the Law Offices of Jerry J Goldstein, we provide reliable counsel to clients in Palm Desert and other parts of the Coachella Valley. Generally, we do not bill for travel time from our office to meet with clients at their homes or business locations when providing services outside of our immediate area.