Incorporating Your Scaling Small Business for Growth

When your small business goes through business growth you’ll want to prepared for the changes your company will have to make in order to grow it into a bigger business. One of the main things you need to do is incorporate your small business development so you aren’t held liable for it if it goes under or for its debt. Even if your company is still a small business you could benefit from incorporating it.

Growing into a Large Enterprise is the Dream of Many Small Businesses; Incorporating Can Help Make That Dream a Reality

Forming an LLC or a Limited Liability Corporation is a great plan to make your business last for the long haul. One major reason for you to form a corporation is to remove your liability. That means that if your company tanks you won’t have to take the hit in your personal assets such as your house, car or personal belongings.

Credibility is another big reason that companies incorporate. Rather than just having a simple name like ‘Bob’s Refrigeration’ it would become ‘Bob’s Refrigeration LLC’ or ‘Bob’s Refrigeration Inc.’ Not all customers prefer to do business with a corporation, but there are plenty who do.

If you’re planning on selling your business in the future incorporating your small business development is a great idea. If you don’t have your business incorporated when you leave your business or die, the business will just end. Scaling small businesses often end up being sold to larger corporations and making sure the company is transferred to the buyer is important.

Tax flexibility is another great part of incorporating. A corporation or LLC can avoid double taxes from corporate dividends and profits as well elect to be taxed as a corporation.

Choosing between whether to form a corporation or an LLC can be a difficult choice but luckily there are some clear cut differences that make it easier to decide. An LLC can choose whether or not to file as a corporation or an individual, which is a great flexibility that corporations don’t offer. To form a corporation you need to be a legal US resident but with an LLC you don’t need to be. An LLC doesn’t have to schedule an annual meeting or minute book. A disadvantage to an LLC is that they cannot issue stock, they aren’t able to engage in corporate splitting.

Some advantages to a corporation is that you can issue stock, and you can split the corporate tax liability. You’ll run into some double taxation of corporation profits and shareholder dividends. You have to hold annual meetings and record minutes. There’s a limit on number of owners you can have in an S Corporation.

Forming an S Corporation is a better idea over a C Corporation. With an S Corporation you won’t be doubly taxed on your profits and your shareholder dividends which can attract a lot more shareholders. Both S Corporations and C Corporations need to file their taxes yearly and pay taxes quarterly.

Another option if you are a non-profit organization is to apply for non-profit corporation status. There are a whole slew of advantages to this. The biggest advantage is that you can become tax-exempt and not have to pay any taxes on your profits. Another one is if someone donates money to your certified non-profit corporation they can write it off as tax deductible, a great way to encourage people to donate to your organization.

Some taxes on property will be exempt with your non profit corporation. Non-profits are exempt from paying property taxes under state law in all 50 states to help them accomplish their goals.  Applying for a non-profit corporation status helps appeal to donors who are unsure if they should donate.    A small plus is that you will pay less in postage, which can potentially save you a fair bit of money because USPS offers a discounted rate of postage for non profits. It doesn’t apply to all non profits, and checking with your local postal office is the best way to find out if you’re eligible.

Sometimes choosing which type of corporation you should apply for can be a little bit hazy. Working with a good California Small Business Attorney Services firm to help you understand every advantage and disadvantage to each corporation is a great way to decide. They can run the numbers for you and see what would benefit your small business the most.

Finding Funding For Small Business Development & Startups in California

When you’ve created a grand idea for a small business in Los Angeles California or elsewhere, you don’t want to be limited by how much money you have starting out. Luckily, there are plenty of opportunities to get funding for your company if you know where to look.

Grants and Loans as Ways to Fund Your Small Business Start-up

Grants are possibly one of the best ways to get started because they’re basically loans that you don’t have to pay back. However, grants are only given out to certain companies and have many different stringent policies that determine if you’re eligible. A lot of it depends on where your business is starting up and what your business is doing.

Some places will give you a grant if you are starting up a renewable energy company, because people don’t mind trying to help those types of businesses. Some areas need to expand their tourism industry, so if you’re in the tourism industry you might get a grant. The last grant you can receive is for a child care center and it all depends on where you are. To get the grant, you will probably have to match the grant with a loan or with other funds. It varies depending on which business and who is giving you the grant. Grants are usually for start up business development or small business growth and are extremely competitive.

Loans are another great way to get some startup capital. Take out as small of a loan as possible, and try to get as low of an interest rate as possible so that you’ll eventually break even with your revenue. A lot of the time it’s hard for a start up business to get a loan as banks usually don’t want to invest in something risky.

Signing a Loan is Relatively Simple if Your Small Business has Assets

However, the SBA, or the Small Business Association can help get you a loan with a bank. The way this works is that banks usually will not loan money without some type of collateral. Since small businesses usually don’t own buildings or other assets they usually have no collateral to use. Sometimes a small business will have to use personal assets as collateral, which is extremely risky because you run the risk of losing your house. The SBA will agree to cover 75% of the loss, which will help reduce the risk that the bank is taking in giving you the loan which will help you get that loan. It’s important to note that the SBA won’t lend you any money themselves, so it’s still possible you won’t be able to get the loan. Another way to space yourself away from the company and negate the risk of losing your house if the company fails is to incorporate your small business.

The Many Sources of Equity Financing for Your Small Business Development

Equity financing is still a very popular way of finding funding for a company. Several business developments will look towards friends and family members as a source of funding, but sometimes that can be a difficult move. If your business fails it can sometimes ruin relationships so make sure to weigh how important those relationships are to you compared to how sure you are your company will do well. That being said, these types of funding are usually very convenient and don’t require many contractual strings.

Equity financing doesn’t only come from your family though, but finding an investor is hard to do. There are several ‘angel’ investors out there who invest in start up companies and small businesses. They’re called angels because they are generally very patient and friendly towards their investments. They also have been known to give business training and tips towards their investments and help them out in general. They can be pretty hard to find though, so don’t hold your breath.

Venture Capitalists are a lot more common than ‘angel’ investors, but they usually don’t deal with start ups. If you’re a little bit further along and have a good track record, finding a venture capitalist is a good idea to expand your business growth. The problem with them is that they have pretty high standards and scaling small businesses usually face problems with handling their business growth. The thing with this is that you’re going to have to share control, and you might be selling your company in 3-5 years so be prepared for that. If you get involved with a venture capitalist, you are probably going to see your business development incorporated and learn more about incorporating before you pursue funding from venture capitalists: http://www.incorporationattorney.com

Funding shouldn’t come from a single source, and if you can combine a fair number of these funding sources you should be doing pretty well. And remember that you aren’t required to give up control of your company if you don’t want to, just remember that without an investor’s help you probably won’t experience business growth as quickly.