Start-up Structure for a Home-Based Business

Last month in this post, I blogged about the advantages of a Limited Liability company versus a sole proprietorship/partnership. People starting a home-based business often wonder if they should start out as an LLC (or one of the Corp types) or start out as sole proprietorship partnership and then later 'upgrade' the business to one of the other structures.

It's much easier to just start out as a company structure that you will be able to operate within for many years to come. Here's why: If you start out as a sole proprietorship/partnership and then change later, you'll be in for a lot of work getting the changes made.

In the normal course of business, you set up bank accounts, merchant accounts, supplier accounts, credit card accounts, and others. If you later change business structures from a sole proprietorship/partnership to an LLC or corporation, you will get a new Tax ID and in many states you'll get a new business license. This means you have to notify all the appropriate parties of the changes. It means making trip to banks, filling out forms, and faxing paperwork off to your contacts.

When you're first starting out, you usually have the time for these kinds of administrative affairs that you may not have later on. If you start right out as a LLC or Corporation, you cut right to the chase and you won't have all the extra work later on.