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Table of Contents

• Is there a right way in choosing a name?
• What are some mistakes people make when choosing a name?
• What are some examples of good names?
• Why do I have to register my fictitious business name?
• Business Structures Advantages & Disadvantages
• 1. Sole Proprietorship
• 2. General partnership
• 3. Corporation
• 4. S-Corporation
• Important Reminder! 
• Resource Links

 

 

 

Is there a right way in choosing a name?

There is no exact right way in choosing a name however there are things you can do to help be identified more favorably! Try to follow these rules:

• Name clearly distinguishes you from all others in your area.
• Be memorable.
• Simple to pronounce, pleasing to the ear
• Easy to spell and look up.
• Your name should tell your story
• Get feedback.  (ask potential patients, suppliers, friends, etc.)
• Name clearly identifies what you want to be well known for.
• Add a professionally designed logo

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What are some mistakes people make when choosing a name?

• Vague (like ABC Rehabilitation)
• Misleading (like Sports and Orthopedic Services)
• Similiar to others in your area
• Forgettable (like R & J Physical Therapy)
• Hard to spell or pronounce (like Bodi Mekanic Specialists)
• Sounds bad to the ear (like Clipfocker Rehabilitation)

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What are some examples of good names?

• Aqua Therapy and Rehab
• Sports Clinic of Trenton
• Lending Tree (loans)
• Slenderella (diet food products)
• Body Shop (personal hygiene products)

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Why do I have to register my fictitious business name?

States like to keep track of fictitious business names for a couple of reasons. One is to prevent customer confusion between two local businesses that use the same name. Another reason is to give customers a quick way to determine the owner of a company without having to hire a private investigator. This allows customers to easily contact the owners with a complaint or to take legal action against them.

There are plenty of reasons not to shrug off this requirement, the most practical being that many banks won't open an account under your business name unless you have proof that you have properly registered the name. Perhaps even more important, you won't be able to enforce any contract that you sign under the name. Finally, if you don't register your fictitious name, you aren't giving other businesses notice that it's already in use. If a competing business can't find out that you're already using the name, it might take it for its own -- and possibly take away some of your business as well.

How to Register Your Fictitious Business Name

In a few states you register your fictitious business name with the Secretary of State or other state agency, but in most states you'll register it at the county level. The result is that each county in your state may have different forms and fees for registering a name. The best thing to do is call your county clerk's office to find out its procedures, requirements and fees.

Though procedures vary, it's usually fairly easy to register a fictitious business name. Many states require you to begin by searching the county or state fictitious name database to be sure that you aren't trying to register a name that's already in use. Once you're sure the name is available, you must obtain a name registration form (over the phone, in person or from the office's website) and submit it with the correct filing fee, typically $10 to $50. Finally, depending on your state's law, you may have to publish your fictitious name in a newspaper and then submit an affidavit (sometimes called a proof of publication) to the county clerk or state agency to show that you have fulfilled the publication requirement. Your local newspaper should be able to help you with this filing if it's required in your state.

See sample filing form for your fictitious business name (Los Angeles, CA)
 

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Business Entity Chart of advantages/disadvantages

Ask yourself, "What is most important to me regarding a business entity?" 

• Are your profits projected to be over $300,000 your first year? If so, flexible tax strategies may be your priority.
• Are you going solo or do you have partners? If you will be attempting to tackle startup on your own then simplicity will be most important so you can focus on the more important issues of marketing, advertising, and billing.
• Is there a great demand for your services with people and referral sources aching to send you patients?  If so, quick startup and easy maintenance is of utmost priority!

No matter what your situation, the last thing you want to do is form an entity based on someone saying, "Oh, _______ is the best way to go!" Especially if they don't even consider your startup situation! Remember, you can always change your entity later down the road anytime rather easily!

 

Watch the Video Workshop titled "Before I Start My Business"

(Provided by the IRS. Only available with high speed connections. Requires Windows Media Player )

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Type	Fast Startup Time	Low Cost to Start	Easy to Start	Easy to Maintain	Low Cost to Maintain	Flexible Tax Strategies	Protection
Sole Proprietorship
General Partnership
Corporation
S -Corporation

 

I have elected not to include the LLC option.  See your local tax professional or attorney for more information.

 

 

 

 

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Sole Proprietorship

A sole proprietorship is a business owned and operated by an individual, and can only have one owner. Starting a sole proprietorship is quick, fairly uncomplicated and relatively inexpensive. You do not need to file documents with the state to form your business, as you do with corporations and Limited Liability Companies. If you plan to conduct businesses under a trade name, rather than your individual name (i.e. Field’s Landscaping rather than John Field) you will need to file a DBA (Doing Business As) with a local or state office. There may be additional licenses required by the state and city where you will operate your business (sales tax licenses, etc). These requirements vary by state. Another thing to consider is that legally, with a sole proprietorship, the owner and the business are the same. The owner is personally responsible for the debts of the company.

Some advantages of a sole proprietorship include:

• Relatively little time and expense required for creation.
• Relatively few required formalities and regulatory requirements.
• Some states do not impose a fee for the mere privilege of existing.
• No separate income tax filing for the company – income and losses are reported on the owner’s tax return.

The primary disadvantage of a sole proprietorship is:

• The owner is personally responsible for the debts of the company, meaning the owner’s personal assets may be used to satisfy business debts.
   

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General Partnership  Sample PT Partnership Agreement

As with sole proprietorships, general partnerships are fairly easy to establish. Partnerships can have 2 or more owners of the business. Partnerships also do not have to file documents with the state in order to form, as do corporations and Limited Liability Companies, although they may need state and/or local licenses to operate.
Partnerships should have detailed partner agreements in place at the time of formation. Partner agreements should clearly address the rights and responsibilities of each partner – such as the amount of capital each partner will contribute, what will happen if more capital is needed, how profits and losses will be distributed, which partners are responsible for particular management tasks, what happens if a partner wants out of the partnership, what happens if a partner dies, etc. Not having such an agreement could place your investments at risk and provide for a lot of extra time and expense, if the business encounters problems.

Some advantages of general partnerships include:

• Relatively little time and expense required for creation.
• Relatively few required formalities and regulatory requirements.
• Some states do not impose a fee for the mere privilege of existing.
• No separate income tax filing for the company – income and losses are reported on the owners’ tax returns.
• Flexibility in establishing the responsibilities (capital, management, etc.) of the partners.

Some disadvantages of general partnerships include:

• Partners are personally liable for the debts of the partnership.
• Partners are responsible for the business-related actions of all other partners.

Complete the Important Partnership Considerations Questionnaire

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Corporation  Sample Articles of Incorporation

The standard corporation, also called a C Corporation, is the most common corporate structure. Companies must file certain documents with the state in order to become incorporated. The corporation is a separate legal entity that is owned by shareholders. The standard corporation is allowed to have an unlimited number of shareholders, who are typically protected from the debts and liabilities of the corporation. A shareholder’s personal liability is typically limited only to the amount the shareholder invested in the company.

Corporations do experience double-taxation. Corporations are considered a separate legal, taxable entity from the owners for income tax purposes. Therefore, corporations pay tax on their earnings. If corporate earnings are then distributed to shareholders in the form of dividends, dividend income is taxed as regular income to the shareholders. By distributing corporate income in the form of dividends, the corporation does not receive the reasonable business expense deduction. The double taxation occurs at (1) the corporate level and (2) at the individual level. S Corporations and Limited Liability Companies are “pass-through” entities that are not subject to double taxation.

Some advantages of a corporation include:

• Shareholders are not typically personally liable for the debts of the corporation.
• The ownership of the corporation is easily transferable through the sale of stock.
• Corporations have unlimited life extending beyond the illness or death of owners.
• Tax benefits such as insurance, travel and qualified retirement plans are deductible.
• Additional capital can be easily raised through the sale of stock (shares) in the corporation.

Some disadvantages of a corporation include:

• The possibility of double taxation.
• Corporations are more expensive to form and operate than sole proprietorships and partnerships.
• More corporate formalities (annual paperwork) and more state and federal rules and regulations than with sole proprietorships and partnerships.
   

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S-Corporation

An S Corporation is a standard corporation that has elected a special tax status with the Internal Revenue Service. S Corporations have the same limited liability protection of standard corporations. The S Corporation’s special tax status eliminates the possibility of the double taxation that occurs with a standard corporation. The standard corporation pays a federal corporation income tax on its profits. Double taxation then occurs if the corporation distributes profits in the form of dividends to the shareholders, because the shareholder must then report the dividend as personal income and pay taxes on it.

The S Corporation election is quite beneficial when profits from the company will be distributed to the owners each year. By taking the S Corporation election, the income and/or loss of the corporation is reported directly on the shareholders’ individual tax returns.
To be classified as an S Corporation, a corporation must make a timely filing of Form 2553 with the IRS. In order for this election to take effect in the current calendar year, the election must be made by March 15, if the corporation is a calendar year taxpayer. A corporation can decide later to elect S Corporation status, but this election would not take effect until the following calendar year.

Some advantages of an S Corporation include:

• Avoidance of possible double taxation.
• Shareholders are not personally responsible for the debts and liabilities of the corporation.
• Most other advantages of a corporation apply to an S Corporation

Some disadvantages of an S Corporation include:

• In order to qualify for S Corporation status, the corporation can have only one class of stock.
• Shareholders must number fewer than 75.
• Shareholders must be individuals, estates or certain qualified trusts and all must consent in writing to the S Corporation election.
• Shareholders cannot be non-resident aliens.
• More corporate formalities (annual paperwork) and more state and federal rules and regulations than with sole proprietorships and partnerships.
   

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Important Reminder

"Stay simple, focused, and automated!"

Unless you understand how to maintain a corporation, I recommend you start as a sole proprietorship or partnership because they are both very easy to start and maintain.  Everyone will tell you "its smart to incorporate" and they're right but in the beginning you'll have more important things to do than learn how to run a corporation like "how do I maximize payment for my services?"  Later on after establishing your systems and making a profit you can educate yourself a little and incorporate. I suppose you could have a lawyer manage your corporation from the beginning but quite frankly if you don't know an attorney you can trust, its not worth the hassle or the money.  It's easy to get taken for a ride especially since you know little about it in the first place.

 

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Resource Links

• FAQ when choosing a business name
• Your local library will have excellent books on choosing a good business name
• Choosing the best ownership structure for your business

 

 

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