- What will my business liabilities look like?
- What will my tax liabilities look like?
- How flexible are your business needs? Who’s making the decision for the needs?
- What is the likelihood your company will get sued?
- Do you expect to operate at a loss in the first few years?
- Will you invest any profits back into your business?
- Will you crowdfund or make attempts to raise money in the first few years?
- Are you committed to a social mission?
- Do you find answering these questions too difficult?
After reading these questions, do you feel a bit overwhelmed? Deciding how to structure your business takes research, time and effort. Consider seeking professional help. You can contact a small business consulting firm or agency like the SBA. You may contact an accountant (CPA) or tax professional. There are attorneys working with small businesses who can also offer advice.
Building a Cottage Food Business Structure
- Small Business Administration (SBA)
- Internal Revenue – Business Structure
- Business Structure Basics – From Your State (You can locate basic information from your state website. For example: Here’s the state of Texas, North Carolina, and California.)
The Best Business Structure of a Cottage Foods
Do you consider your new food/beverage business a “lemonade stand”? That’s the term we use to describe businesses that were set up quickly with lots of passion but will dissolve when they hit the first financial challenge. challenge. Lemonade stands are not serious businesses and may not be worthy of funding. Lemonade stands are here today, gone tomorrow, and never create a legacy of wealth or success for their founders.
Is your business a “lemonade stang”? If so now is the time to check with your state business portal so you can learn what is needed to become a legitimate business with a firm foundation. If you live in California, visit the California Business Portal and seek guidance so you can structure your business properly.
These portals exist in every state. The title may be different, but they often provide the same type of information. The State of Washington, list this information under Business Licensing Services.
It’s not like states make it easy to locate this information. You will have to dig, but it’s out there.
Best Business Structure
A best practice is to set up an operating entity rather than being a sole proprietor. If you must start as a sole proprietor, do so, but you may not want to remain there. With guidance from your tax attorney or CPA, select and establish an operating entity, such as a corporation or LLC, through which to conduct your cottage food business. It is often said that a sole proprietorship is the easiest method since doing so clearly shows you’re more interested in building income for yourself rather than in building an actual business. The fact is, for small business this is what is needed when first starting. As you start to build those earning, consider looking at an alternative operating entity.
If you cannot locate the information for your state leave us a comment.