Wyoming Business Tips for March 1-7
February 24, 2009 — A weekly look at Wyoming business questions from the Wyoming Small Business Development Center, part of WyomingEntrepreneur.Biz a collection of business assistance programs at the University of Wyoming.
By Leonard Holler, Wyoming Small Business Development Center Regional Director
"How easy is it to get into business and does it require a lot of legal stuff?" Jerry, Casper
It is easier than you think to get into business. America was built on the entrepreneurial spirit of our forefathers and it has done well.
One of the easiest forms of business to start is the "sole-proprietorship" -- a traditional business form started with the owner's assets. The business is synonymous with the owner.
The owner is responsible for both the assets and liabilities of the business. There is no separate entity formed as with a corporation, therefore, there is no reason to be accountable to a board of directors or stockholders. The "buck" stops with the owner.
Unlike other forms of business, the sole-proprietor does not have to register the business with the Wyoming Secretary of State's office; existence is based on common law and its life span is limited to the life the owner gives it. When the owner decides to dissolve the business, the assets are just sold or the owner stops generating income with the assets and returns them to personal use.
Or the business ceases to exist with the death of the owner. The assets can be transferred to heirs, but the business of the sole-proprietor ends with the owner's death. The heirs can use the assets to continue operations, but it will be considered a "new" business.
One of the major disadvantages of this form of business is that the sole-proprietor has unlimited personal liability from the business operations. Because the business and the owner are one in the same, the owner is legally and financially liable for the business and the actions of employees. The owner has to rely on financing, raised by borrowing, or from his or her personal assets. These are some advantages and disadvantages of sole-proprietorships:
-- Quick and inexpensive to get into business. No legal paperwork needed.
-- Owner gets to make all the decisions.
-- No additional tax forms to file. Owner pays taxes personally based on the profitability of the operations and files schedules with their IRS Form 1040.
-- Owner can take advantage of allowable business deductions.
Some of the disadvantages are:
-- Potential for loss of everything in a catastrophic event or business failure.
-- Owner has to make all the decisions.
-- The future of the business depends on the owner's health and abilities.
-- The business might require more money to operate than the owner has available or can borrow.
-- Owner is responsible for self-employment tax. FICA and medicare tax payments are paid with other personal taxes on a quarterly basis.
-- Passing the business on to others, heirs or employees, will require the dissolution of the sole-proprietorship and possible formation of another form of business. Getting out of business may be harder than getting into it; a topic for another article.
The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, e-mail firstname.lastname@example.org or write 1000 E. University Ave., Dept. 3922, Laramie, WY 82071-3922.
Posted on Tuesday, February 24, 2009