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Caveats for those starting closely held businesses

Starting a new business can be exciting, but it also takes a significant amount of planning. There are a number of issues that Arizona entrepreneurs need to work through before starting closely held businesses. Skipping crucial steps could end up causing more issues later.

For instance, choosing a name for a business can be both fun and frustrating. After taking the time to pick a name, it would be a mistake not to determine whether it is already in use by another business. Most business names are registered, and a search could save a legal entanglement later if the name is not available. The Arizona Secretary of State maintains the database of business names and can be searched online. 

Once the task of naming the business is settled, the legal structure of the company will need to be determined. The type of company that is formed will determine how it is treated for tax and liability purposes. Many people find that a sole proprietorship is easier to deal with on the front end, but when it tax time comes or the business encounters legal difficulties, it might not be as easy. Other entities such as limited liability companies (LLCs) require more work up front and maintenance, but they also provide better protections for business owners and are treated differently when it comes to taxes.

These are just two of the legal issues that need to be handled before potential business owners start closely held businesses. Many people are anxious to get their companies off the ground. However, neglecting to handle all of the legal and business decisions that go along with starting a new company can prevent the business from reaching its full potential.

Source: Forbes, "8 Rookie Mistakes To Avoid When Starting A Small Business", Nellie Akalp, Jan. 28, 2016

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