According to the U.S. Small Business Administration, Georgia has more than 962,000 small businesses that employ about two-fifths of the state’s workforce. Of those small businesses, about 78 percent employ ten or less people And with the state’s economy growing, more people are choosing to be self employed or start their own business.
Small businesses have to follow employment and tax laws just like large businesses. While the SBA does a great job at providing education about how to start and run a small business, many tasks require the help of a Georgia corporate attorney. How can a corporate attorney help you?
First, if you are starting a business from scratch, you need to know the local and state laws. How do you incorporate with the Secretary of State? Are you required to have a business license in your city or county? Also, specific industries and services have additional requirements. For example, if you are opening up a restaurant or bar, you will need to know the alcohol licensing requirements. Some industries have environmental regulations.
In starting your small business, you need to determine what type of business you will be. Your options include:
- Sole proprietorship – Many freelance writers, accountants and other service professionals all under the category. This type of company is risky since business and personal activities are not separated and a business liability may become a personal liability.
- Partnership – If you and at least one other person go into business together and share expenses, profits and liability, it is recommended you hire a Georgia corporate attorney to help you establish the terms of the partnership. A formal agreement helps prevent one partner from taking advantage of the other. To get some legal protections a Georgia corporate attorney can help craft a limited liability partnership and file this with the Georgia Secretary of State.
- Incorporated Business – These come in several flavors:
- Limited liability company. You see the initials LLC after many business names, which is a small corporate form that allows the owners to take advantage of several tax savings. This type of business must be registered with the Georgia Secretary of State.
- Professional Corporation. You see the initials PC after many business names, which is a small corporate form for licensed professionals that restricts the ownership of the corporation. This type of business must also be registered with the Georgia Secretary of State.
- Finally, the most complicated type of small business is the corporation. However, it offers the most protection of your personal assets. Most people use a Georgia corporate attorney when establishing this type of business.
The first challenge of starting a corporation is simply determining the name. You want to have a name that reflects what you do. However, often the name you want is already in use and you can’t have the same name. Besides, you will want to differentiate yourself from another business.
You also have to decide if you want to be a “C” corporation or an “S” corporation. The difference is in how they are taxed. A “C” corporation is taxed as a separate entity. Owner s of “S” corporations file a federal tax form but no income tax is paid. The owners report it on their personal tax returns.
Once you choose the name and determine what type of corporation you want to be, you will have 90 days to incorporate. You will need to file the articles of incorporation and send any fees to the Secretary of State’s office. You will be required to publish your intention to incorporate in the county’s legal organ, which is usually the local newspaper.
Corporations are required to have directors. Many choose their corporate attorney to be one of the directors. Smaller corporations simply use family members as the corporate board. No matter who is on the board of directors, an annual meeting must be held and stock must be issued.
One thing is certain no matter what type of business you establish, you will have to pay taxes. Your accountant and attorney can work together to keep you out of hot water with the IRS. When you start your business, you will establish a tax identification number. If you are a sole proprietor, this is usually your Social Security number. Corporations and other types of businesses will establish separate numbers. If you are a sole proprietor, you will file on Section C of Form 1040. Partnerships use IRS Form 1065 and corporations use IRS Form 1120.
Businesses with employees will be required to pay employment taxes. Not only are federal and state taxes required to be withheld, but so are Social Security and Medicare taxes. If your business uses contract labor, you are required to do issue IRS Form 1099 form for the contractors.
Many business owners do not use an attorney when establishing their business. Many of them will never run into any problems. However, using a Georgia corporate attorney when you start your business can stave off problems and possibly even a lawsuit later.