Choosing a structure for your business is an important step, and requires doing your homework. Not all structures as suited for all people and all businesses. Basic structure types are sole proprietorship, partnership, limited liability company and corpor-ations. Variations within these structures occur in different states according to various state laws, but are all very close.

Sole proprietorship – the most common type of structure is the sole proprietorship. In this structure, the businesses is in essence another name for the business owner. All profits belong to the owner, and all debts and liabilities are the responsibility of the owner.

This is the simplest type of business structure to set up and simple bookkeeping procedures can be used. The upside to this business type is being taxed only once. The owner’s profits are taxed as income. Most sole proprietorship owners save receipts on all purchases and look for ways to declare items as business expenses to keep taxes low. On the downside, if the business is sued the owner is liable, and if the business acquires debt is personal debt to the owner.

Partnerships – a partnership is just like a sole proprietorship but with more than one individual. Most business professionals recommend, rather than a partnership, dividing shares in a corporation or limited liability company to keep things neater and less confusing and to offset personal liability.
Limited Liability Company – or LLC, actually a very simple form of corporation in most states. It limits the liability of the partners or shareholders and is formed for a specific purpose, such as operating as a business. It is seen as a separate legal entity legally and offers taxation benefits to owners of small companies that are not always available to corporations.

The LLC offers, as the name implies, limited liability. If the company is found liable in a lawsuit only the assets of the LLC can be attached, whereas in a partnership or sole proprietorship the owner’s assets are at risk. The LLC offers many of the benefits of a corporation, with a simpler structure.
Corporation – the corporate structure offers the most protection for shareholders.

It is also the most complicated type of structure to set up. While an owner can set the corporation up on his own, most people hire lawyers to assist in the process. Corporations are regulated by the states in which they are registered and by the federal government. While an individual can form a corporation and own all of the stock himself, he must have officers and a board of directors, and these individuals are tasked with ensuring that the corporation follows all state and federal laws and regulations.

Advantages to a corporation include legal protection from debt and liability, but disadvantages include double taxation – the salary of the owner as well as corporate profits are taxed, and less flexibility of action.

The type of license needed for your business will depend on several factors. They include the jurisdiction that our business is located in, and the type of business. For instance, if your business is located in a city, it probably needs a license from the city itself, from the country, and in some states from the state as well. Since business licenses are a great source of revenue for government agencies, counties and cites both try to get in on the act.

Now, as to the type of business, that may be regulated as well. If your business is an insurance agency selling life, health, and auto insurance then you will need a state license for each: life, health, and property & casualty. If you also sell mutual funds or stocks then a federal NASD Series 7 Securities License will be required. These licenses are issued only after stringent testing and are subject to revocation if laws, regulations and guidelines are not followed.

Lawyers will need to pass a state bar exam and receive a state license to practice law in addition to city and country licenses. A doctor in private practice will have to have city and county business licenses as well as a state medical license. An insurance agent will be in the same category, needing a license from the state that is partially contingent on passing a national standard real estate examination.

Some businesses will need special licenses from either state, county or city regulatory agencies in addition to a standard business license. A daycare for instance will need to be inspected by children’s services. A liquor store or bar by liquor control, which is usually a state organization administered by the county. In addition, while not legal licenses many professionals encourage their members to join professional organizations. The members will often take exams and try to earn credentials to show their knowledge and expertise. While these credentials may not be legally required, they are smiled upon by most consumers.

When it comes time to license your business, first check with the city and county to see what is required. Then determine if your particular business has any special licensure that you may need to acquire.

Types of insurance needed for a business will, of course, vary from type of business to type of business. If a business is larger than a one man sole proprietorship and actually has employees, then unemployment insurance is required, with premiums paid to the state government or a designated energy.

Also, with employees Workman’s Compensation insurance is required, which covers medical emergencies and injuries employees could sustain while on the job. Also if your business has employees you may be providing some sort of health insurance coverage as a benefit.

Determining exactly what type of insurance the business itself needs is a different story. How much risk is there in your particular business of liability? Obviously if the company owns or operates motor vehicles then at minimum liability insurance for the vehicles is needed.

It may be wise to pay a slightly higher premium for comprehensive and collision insurance to cover repair or replacement in case of accident. With regards to liability insurance, don’t just take the minimum required by the state. Most experts recommend having at least a million dollars in liability coverage on each vehicle.

Lawyers see deep pockets when company vehicles are involved in accidents, and the last thing you need is a half a million dollar judgement with only two hundred thousand in insurance, which would leave three hundred thousand in company assets vulnerable. Regarding liability insurance, better safe than sorry.

The same thought holds true with regards to liability insurance on company property. If someone trips and falls on ice during the winter the company is liable, so having at least a million in insurance, if not more, is essential.

Taking a look at the personnel involved in your business, you can probably spot the key individuals, without whom the company could not function, or at least could not function as well. For these individuals the company may wish to have key man insurance, a life insurance policy that pays off if someone essential to running the business dies, providing functions to replace his expertise.

If the company is a partnership, or an LLC or corporation with key individuals, then having life insurance policies that will buy out the shares of the deceased partner for the remaining partners is a good way to maintain continuity in the business. Then the deceased family members will receive cash settlements, but loose interest in the business, which they may not have expertise in.
There are many types of insurance available, and the needs of every business are different.

Consulting an insurance specialist who works with other businesses will give you an idea of options, and then it is up to you to decide on what is right.