When starting or acquiring a business, you've given alot of time an thought as to how you're going to be successful. Far too often, simple organizational steps and tax considerations are ignored, amidst the eargerness to "get it up and running." A few minutes now, can save you big money down the road.

First, you need to assess legal implications of the business. Do you have co-owners ? Do you have liability exposure ? Do you plan on being profitable immediately ? Do you anticipate losses in the early years ? Will you have outside investors ? Do you plan to provide fringe benefits such as health insurance or pension benefits for yourself or your employees ? Are you planning on owning this business until "doomsday" or you planning on building the business for eventual sale ? All these questions will help frame your decision regarding choice of entity type. Here are your choices. Be sure to read about some of the benefits and detriments of each ... and always consult with an attorney and CPA before making your decision final.

Next, you've got to determine the tax accounting methods that will be used in the business (most importantly, whether the cash or accrual method will be used.) Be careful, there are restrictions on the use of both methods, and potentially significant tax savings available by choosing the right methods for you.

WHAT TYPE OF CORPORATION SHOULD YOU USE FOR YOUR BUSINESS?

Now it's time to pick a year-end for your new business. Again, there are opportunities to save more taxes by choosing a year-end which meets your needs or conforms to your nature business cycle.

We recommend that you prepare a comprehensive financial plan, in addition to a business plan for all new businesses. It's a lot of work, and things frequently don't turn out as they are planned, but most of our clients find that it is an outstanding learning experience, particularly if this is your first business. Special attention needs to be paid to those cash flow projections.

You need to have some basic tax planning considerations identified and explained to you. You just can't pretend that taxes don't exist ... they do, and they may have some influence on when and how you acquire assets such as machinery, equipment and inventory, how and when you liquidate your liabilities, and when you take any bonuses related to an exceptionally good year. You also have to recognize that some tax postures are more aggressive than others and while they have short term benefits, they may come back to haunt you in five years.

Your organizing documents need to be drafted and filed. We require all of our clients to furnish us copies of these documents before we begin working for them. Every once in a while, these documents are prepared, but never filed. More than once, we've run into a client who thought that they were a limited partnership or a corporation but never having filed the paperwork, the client didn't have a limited partnership or corporation, and was amidst a tax disaster. Where owners are loaning money to their business in addition to your investment, loan agreements are a must.

You need to consider all the government and regulatory bodies with which you must register. In almost every state, you must register with the Secretary of State in your state. The taxation department usually must be contacted so that you may withhold income taxes from your employees, collect rooms / meals or sales taxes. Unemployment departments usually require you to register. Other relevant laws and local ordinances need to be reviewed to determine if you must inform or obtain liceses and permits from the zoning board, the Board of Health, the Building Department or the Environmental Protection Agency. Fees are often required. You need to obtain Federal, state and local identification numbers.

You need to consider the whether you'll be starting qualified retirement plans for employees (including employee-owners) or other types of employee benefit plans. Plans need to be drafted, and some require IRS pre-approval.

Don't forget insurance. Determine your property and liability insurance requirements.

Any tax election statements need to be prepared and filed in advance of initial year tax returns.

You need to set up your financial, payroll, and tax accounting systems.

Do you need a partnership, shareholder or member agreement ? You bet ! Click here to find out why.

If you're going to do business as a Partnerships, Limited Liability Company or Limited Liability Partnership, any assets you are investing in the business need to be valued by the partners or members for capital account maintenance and Section 704(c) tax allocation purposes. You need to verify that the desired tax allocations are allowed under the Section 704(b) rules and draft tax allocation language for partnership agreement or LLC operating agreement accordingly.

Buy/sell agreements ("divorce clauses") are absolutely essential if you are not the only owner of the business. There are tax implications to "divorce clauses" and they need to be considered.

If you are incorporating, you need to obtain corporate charter, prepare bylaws and initial set of corporate minutes, and issue stock and debt securities.

If corporate shareholders intend to transfer appreciated property tax-free to the corporation, and they will be receiving stock in the corporation in exchange, they need to include " statements" in their returns personal income tax returns.

If a C corporation is going to be best for your business, you need to plan now to avoid double taxation in the future. A compensation plan needs to be established for compensation to be paid to shareholder employees. You need to consider leasing assets which will appreciate in value to the corporation by the owners rather than owned by corporation. Employment contracts, bonus plans, deferred compensation plans, leases, to implement the plans need to be drafted.

S corporation elections which will be effective for your initial year must be filed with the Internal Revenue Service within the first two and one-half months. You need to consider adding stock restrictions to your stock to avoid the possibility that you or one of your co-owners might inadvertantly terminate your S-Election by transfering stock to a prohibited party.

Avoid redemption agreements. Look carefully at cross purchase agreements as a tax effective alternative.

If you are acquiring an existing business, you need to have the assets you are purchasing appraised, including any intangible assets. These values need to be compared against their insured and property tax values.

You need to perform a due diligence review to identify any liabilities burdening assets or the entity to be purchased and any contracts (such as leases and employment agreements) or other relevant legal considerations (such as lawsuits against the business) that will affect you as the buyer.

If acquisition will be achieved with a stock purchase of corporate stock, consider whether one of the Section 338 elections is advisable.

If you are acquiring a corporation, you need to quantify how corporate tax attributes such as net operating loss carryforwards, capital loss carryforward, built-in losses, and credit carryforwards, will be impacted by the rules in Sections 382 , 383 and 384 of the Internal Revenue Code.

If you are acquiring an existing business, a purchase and sale agreement, bill of sale, and non-compete agreements need to be drafted. Careful consideration of the allocation of your purchase price needs to given to the agreement in view of Section 1060 of the Internal Revenue Code.

Don't forget the Uniform Commercial Code. You need to comply with any bulk sales notice requirements.

Taxable asset acquisitions require that IRS Form 8594 needs to be prepared for both the buyer and the seller.

This is complicated. Don't go it alone. Consult your CPA and your attorney.