Building a Strong Foundation for Your Business
Essential Steps for Entity Setup and Compliance
Starting a business is a major milestone, and the foundation begins with selecting the right business entity. The structure you choose will have long-term implications for your tax obligations, liability, and how you manage the practice's finances. In this blog, we’ll walk through the basics of entity setup, the importance of compliance requirements, and steps to ensure you're off to a strong start.
1. Understanding Business Entities: Why It Matters for Business
When creating your business, selecting the right business entity is critical because it will determine how you’re taxed, your personal liability, and even how you raise capital. Here are the most common types of business entities you should consider:
Sole Proprietorship – This is the simplest form of business entity but leaves you personally liable for any debts or legal issues.
Partnership – If you’re starting the practice with a co-founder, a partnership is an option. However, it’s important to establish clear roles, responsibilities, and a partnership agreement to protect all parties involved.
Limited Liability Company (LLC) – LLCs offer liability protection while keeping taxes flexible. You’ll need to file an LLC with your state and follow ongoing compliance regulations.
S Corporation – This structure is ideal if you want the benefits of limited liability along with tax advantages, but it requires more administrative upkeep.
C Corporation – Typically used for larger businesses, C Corps are taxed separately from their owners, which can result in double taxation, but they offer unlimited growth potential.
Selecting a good accountant will help you determine which entity will best serve you! I know, I know…”but how do I know what accountant is good for me?!” – We’ve got you covered, we’ll discuss in point #3 :)
2. How to Register Your Entity: A Step-by-Step Guide
Once you’ve chosen the right entity for your practice, the next step is to officially register it.
Choose a Business Name – Make sure your business name is unique and reflective of your practice. Be mindful of state naming rules.
Secure the Domain Name – Before registering, check if your business name's domain is available. Secure a .com, as well as variations to protect your online presence.
Register with Your State – Every state has different requirements, but typically, you’ll need to file your Articles of Organization (for LLCs) or Articles of Incorporation (for corporations) with the Secretary of State's office. This officially recognizes your entity.
Get an EIN (Employer Identification Number) – You’ll need an EIN to hire employees, open a business bank account, and file taxes. You can apply for an EIN online through the IRS website.
Licenses and Permits – Depending on your profession you may be required to carry certain state specific licenses. For example: Healthcare practices will require specific licenses beyond entity registration. Research your state’s healthcare requirements to remain compliant. Common licenses may include a dental license, sedation permits (if you plan to offer sedation dentistry), and additional certifications for clinical staff.
3. Selecting a Good Accountant
Once your business is registered, one of your first calls should be to a qualified accountant with experience in your specific industry. Why?
Tax Compliance: Different industries require different accounting knowledge. Tax issues can become quite complex when you begin to discuss things like: equipment depreciation, employee benefits, and other costs. A good accountant can guide you through these challenges.
Financial Strategy: An accountant can help you structure your finances, manage cash flow, and plan for growth. Make sure to vet potential accountants by asking about their experience with your industry specifically, knowledge of tax codes, and whether they offer proactive financial advice.
4. Compliance Requirements: Protecting Your Practice
Compliance is a critical aspect of running your business. Here are some key areas to focus on:
Selecting Compliance Vendors: Determine the best compliance vendors for your practice. This includes identifying the right insurance providers for your needs, such as business insurance, liability insurance, office overhead insurance, and workers' compensation. Research and compare vendors to find those that specialize in your industry and have a solid reputation.
Radiation and OSHA Compliance: If your practice uses X-ray equipment, ensure you adhere to state and federal radiation safety requirements. OSHA standards will also apply to maintain a safe working environment for your staff.
HIPAA Compliance: Protecting patient privacy is paramount. Familiarize yourself with HIPAA regulations and implement necessary practices to safeguard patient information. You may want to consider hiring a compliance officer or consulting with a compliance specialist.
5. Banking and Financing: Securing the Funds You Need
Finding the right banking partner is essential for any business. Choose a financial institution that understands your industry and offers products tailored to your specific needs. Here are some tips on securing financing:
Choosing a Bank: Look for banks that specialize in small business loans or have programs designed for startups. Financial institutions that focus on new businesses may offer more flexible terms and support.
Getting a Loan: Prepare a comprehensive business plan that outlines your goals, financial projections, and operational strategies. A well-prepared plan is crucial when applying for loans or attracting investors. It can make a significant difference in securing the funds you need to launch and grow your business.
The Bottom Line: Set Up for Success!
Our biggest recommendation…Set it up correctly from the start, you’ll thank yourself later ;)
Setting up the right business entity for your business is a crucial step toward long-term success. The right structure not only impacts your taxes and liability but also sets the tone for how you’ll manage your business. Make sure to take your time to choose the right entity, register it properly, and ensure compliance with all necessary regulations. Partnering with qualified professionals, from accountants to compliance vendors, will help you build a strong foundation.
Stay tuned for our next post as Moxie takes a deep dive into Creating a Brand for Your Business!