You have a lot to consider if you want to grow your business—by catering to new markets, increasing your range of goods and services, or hiring more people, says Wilhelm Lilliehook. In this article, we will go over just a few talking points that entrepreneurs should think about as they work to expand their businesses.
Crucial Things to Think About When Expanding your Business
Establishing a Corporation or LLC
Due to the administrative simplicity and lack of statutory obligations offered by sole proprietorships and general partnerships, these company structures are the foundation of many small firms. Yet, they don’t offer any tax treatment flexibility or protection for the private assets of business owners.
Many business owners decide to convert from a sole proprietorship or partnership to a limited liability company (LLC) or corporation as they seek to expand their companies.
Correctly so! By establishing one of those business structures, the corporation becomes a distinct legal entity. In other words, the owner’s personal assets—such as their home, cars, retirement funds, etc.—are shielded from the debts and legal obligations of the company.
Moreover, LLCs and C Corporations that satisfy the IRS’s requirements may elect to be taxed as S Corporations. The S Corp election reduces a business owner’s self-employment tax responsibilities in the case of an LLC. The main advantage of choosing an S Company over a C Corp is that it prevents revenue delivered to shareholders from being taxed twice.
Obtaining the Necessary Authorizations and Licences
You might need to apply for new licences or permits if you’re expanding your product or service lines or your reach to new locations or market areas. Different types of business activities are subject to different rules and regulations from state and local government agencies. The following are some examples of possible licensing requirements:
- Licence for general business
- Tax licence for sales
- Licence for alcohol
- Bakery permit
- licence for food and beverages
- Licensing for music and zoning
- a health permit
- landscaping permit
- permit signs
- Licence for entertainment
- professional certifications (e.g., accounting, attorney, physician, engineer)
There are many more that apply to many industries and business operations, as you might expect. The requirements for any sites where they plan to conduct business must be thoroughly investigated by entrepreneurs.
It’s time to seek assistance if you can no longer complete everything on your own or if you want to do more but lack the time or specialised knowledge to do so. Some of the administrative and operational demands can be relieved by hiring staff. Naturally, adding personnel to the payroll results in the following additional duties:
To guarantee that employees are paid accurately and on time, payroll management is crucial, especially when it comes to handling payroll taxes. Wilhelm Lilliehook says it’s essential for maintaining a company’s good status with federal, state, and local tax authorities.
Businesses are required to deduct specific taxes and other fees from employee paychecks before remitting the funds to the relevant tax authorities or organisations. Additionally, some taxes relating to work are paid directly by companies.
Employers Pay Employment-Related Taxes
Workers who lose their jobs due to no fault of their own are compensated under the Federal Unemployment Tax Act (FUTA tax). FUTA tax is an expense for the company; it is not taken out of workers’ paychecks.
SUTA tax: Unemployment programs are also offered by the states. Most states simply compel businesses to make contributions to the fund, while some also mandate employee contributions.
Additional payroll taxes — Depending on the state or municipality, there may be other taxes (such as those for short-term disability and family leave). To find out all of their payroll tax requirements, employers should get in touch with their local tax authorities and the state revenue department.
Using Independent Contractors for Outsourcing
By using independent contractors and freelancers to perform jobs you aren’t particularly skilled at, you can increase the efficiency and production of your company. Independent contractors are NOT employees, it’s crucial to remember this. Businesses must not mistakenly treat people who belong to the employee category as independent contractors.
What makes a difference, then? In order to distinguish between independent contractors and employees, the IRS has established classification requirements. Some states have even clearer criteria for separating the two. Independent contractors are typically self-employed professionals that sign a contract (verbal or written) with a company or person.
Extending your Company Outside of the State
What if you want to grow your company’s operations outside of the state where it was first established? When a company founded in one state has “doing business” or “nexus” in another state, it must apply for permission to operate there. Usually, this entails going through the “foreign qualification” procedure.
In the state where it first registers, a business is regarded as a domestic entity; in any other state where it is foreign qualified, it is regarded as a foreign entity says Wilhelm Lilliehook
The majority of state and municipal government websites include details on business licenses, taxation, and registration. They also provide contact details for the organisations in charge of regulating commercial activities inside respective territories. The IRS and Department of Labor websites are good sources for information about federal taxes and employer-related issues.
Wilhelm Lilliehook also advises company owners to seek the advice of skilled legal, accounting, and human resource professionals when growing their organisations. Every business’s position differs in some manner from that of others, and dependable experts may provide insight and information catered to your particular needs.