Legal and financial considerations for growing businesses

Illinois residents thinking of starting their own businesses may be interested in the challenges faced by entrepreneurs as their companies grow. The need to hire additional staff and move into larger premises can be both thrilling and daunting, and business owners would be wise to take these steps only after careful consideration. Legal and financial details that should be factored into this decision include the different types of business entities that can be adopted and the taxation and regulatory implications of using salaried or freelance workers.

Many businesses are formed as sole proprietorships. While this is a straightforward way to get a business started, it does not protect the owner's personal assets from lawsuits brought against the company. A prudent step for an entrepreneur with an expanding business may be to form a corporation or limited liability company. In addition to asset protection, these entities may also provide tax advantages.

Hiring staff is another step that should not be taken lightly. Adding somebody to the company payroll comes with numerous responsibilities and obligations, and freelance workers may be advisable in certain situations. Agencies such as marketing and bookkeeping specialists are another option for an expanding company. This strategy ensures that important work is handled by experienced people as a business grows.

Expanding a business is taking a step into the unknown, and this usually involves a certain degree of risk. While some decisions will be dictated by necessity, others should be taken warily. A business law attorney may closely scrutinize contracts and lease agreements to identify draconian termination penalties. The entrepreneur would have to pay these if the new venture were to be less successful than hoped. The attorney could also offer advice regarding the legal and financial advantages of the various forms of corporate entities.

Source: SBA.gov, "How to Take Your Solopreneurship to the Next Level", Anita Campbell, September 18, 2014

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