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Cooking Business Legalities – Determining The Business StructureThere are a number of cooking business legalities that must be considered when starting a cooking business. These issues include obtaining the proper permits to run the business, setting up an accounting structure, obtaining insurance, understanding the tax laws of the particular state where the business will reside or understanding which states expect the collection of taxes online, and issues related to what type of legal entity the business will be. These cooking business legalities must be addressed even before the business begins operations. One of the most important tasks that you can perform related to cooking business legalities is to give it a meaningful name. The name of your business will become your brand, and will be one of the first things that the public sees in connection with your business. When naming cooking businesses, there is a tendency to give the business a name that represents the person as well as the industry or specialty. This is true whether the business name is attached to a brick and mortar store or to an online website. Using your personal name means that it does not have to be registered, but using an industry or specialty specific name does have to be registered whether for an actual store or for a website. The naming of a website is part of choosing a domain name, which must be purchased and registered. You must first check to make sure that the domain name is available. The registering of your business name also protects you from attempts by others to use the name.
Cooking Business Legalities Involving Licenses and Permits The business should be registered with the city or county in which you would like to conduct business, this is the license to operate. Insurance Although insurance can be costly it is important for business owners not to skip the purchase of this necessary item in order to have some level of protection from losses to the business, such as through theft or fire, some sort of disaster or injury to employees.
Insurance for a cooking business should cover inventory, tools, equipment, and furnishings for the physical building if there is a brick and mortar business, as well as office equipment and computer equipment. If there is a home work space such as for a catering business, insurance should be purchased to cover that space as well, because home owners insurance may not be a part of the package. Cooking Business Legalities Involving Taxes and Accounting It is extremely important to have the necessary paperwork in order for your tax payment responsibilities for the business, because failing to do so can shut down your business until taxes are paid, therefore, it is worthwhile to meet with an accountant and an attorney who specialize in small business set up to assist with putting this important step in order. Cooking Business Legalities Involving Choosing A Business Structure The choice of name is important, and for operations and tax purposes, choosing how the business will be structured is another activity to be performed. There are four structures that can be chosen for a business: Sole proprietorship The sole proprietorship is the simplest and least costly structure that a business can setup. In this type of structure, you are the single owner of all assets and profits of the business, control over all of the decisions of the business. On the other hand you are responsible for all of the debts and liabilities. In other words you and the business are one and the same, in this type of structure profits and losses are reported as part of the single owner’s tax return as personal profits and losses, as personal income.
Partnership In this type of structure you can split the tasks required to run the business, if you are good at one type of activity such as marketing this is the task that you can concentrate on in the business while your partner concentrates on say for example production. Although this type of structure is also inexpensive, and easy to set up, it is advisable that an attorney be consulted to make sure the paperwork is in order and firmly establishes who does what and who is responsible for what financial issues in the business. If the partnership is equal, profits and losses will be shared equally and this should be spelled out up front. The profits will be applied to each partner’s tax return as personal income. Corporation In this type of structure there exists an entity that is separate from those that members of the business, the shareholders. The entity can be taxed and sued just like a person, but there is no personal liability to the shareholders. The shareholders elect from among their members a board of directors to run the business making policies and decisions for the entity, and entering into legally binding contracts for the business. The corporation continues to exist even when shareholders are no longer a part of the business.
LLC (limited liability company) The limited liability company officially known as an LLC functions in some ways like a sole proprietorship, by reporting profits and losses on the personal income taxes of the owners. However, the personal liability of the owners for debts and claims against the business is limited, the owners are protected from personal responsibility for these debts and claims against the business, creditors can only claim the assets of the business not the personal assets of the owners. This type of structure is also easy to set up, and should also be set up by working with an attorney to make sure that the responsibilities of each member of the LLC are spelled out, since each state has its own default rules that will apply in the absence of a formal written agreement between the members of the LLC.
Next: • Obtaining financing for the business • Hiring employees • Establishing an online presence • Bookkeeping For some great information on starting a cooking business including cooking business legalities a great reference is: • Restaurant and More by Entrepreneur Magazine
Cooking Market Research
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