On the Write Road

In this next part of the series, you need to create a business name and decide on a business structure if you have chosen to become an independent contractor.

Choosing a Name

You can be creative and come up with a new name or use your own name for your business. If you are well-known in your industry then using your name might work well. If you decide to create a name, remember it embodies your brand. Therefore, it must:

Tell what you do – The name you choose should tell a customer what your company does. A name like “Acme Inc.” doesn’t give a hint of what the business is all about. However, names like ”TechProse”  or “ProWrite” tell you that these are writing companies.

Tell how you do it – Your name will evoke an image for a client. So how do you want to be seen? As quick, reliable, or professional? Words are powerful so you must choose them carefully. Consider these two company names:

• Precisely Write
• ProEdit

Both companies provide writing services but each is emphasizing something unique about their service. The first emphasizes conciseness and correctness and the second expertise.

Show your uniqueness - If you know what qualities are important to your target audience you can emphasize these in your name. For example, Jiffy Lube, the auto maintenance business, lets you know they emphasize fast service.

Be easy to remember and spell – You don’t want a name that is forgettable or so unusual it is difficult to say or spell.

Doesn’t restrict your business – Choose a name that is flexible. Your company will grow and change. You may move into different areas of business and you want a name that allows for this expansion.

Creating the Perfect Name

The best way to choose a name is to do some brainstorming. This is what Melody and I did to come up with our name “Write on Time”. We played with different word combinations and created five names. Next, we tested these names by showing them to friends, family, and colleagues who voted on their favorite.

Don’t rush the process of naming your business! You want a name that correctly reflects what you want your business to convey. Also make sure you test your name with different people to get feedback.

Here is an article from About.com that lists questions you can ask yourself when creating a name.

Note: Depending on your business type, you may have to register and/or receive approval from the local or state government where your business is formed. After Melody and I decided on our name, we went through the process of forming a Limited Liability Corporation (LLC) with Legal Zoom. During the process, we found that there already was a company in California named Write on Time. So we had to make a choice–choose a different name or modify the name we chose. Melody and I decided to modify our name since we really liked it. I added on the word “Solution” and that made our name unique. So be forewarned, you may need to change your name when forming certain business structures if it is not unique, meaning another business already has that name.

Choosing a Business Structure

The next major decision you will need to make is to decide on the type of business structure you should establish. The Internal Revenue Service (IRS) lists five types of business structures:

• Sole Proprietorships
• Partnerships
• Limited Liability Company (LLC)
• Corporations
• S Corporations

A sole proprietorship is the least expensive and easiest business structure to create. The IRS defines a sole proprietorship as someone who owns an unincorporated business. If you decide to set up this type of business structure, you may have to pay fees for a fictitious business name and a business license.

Note: I have found that companies are more willing to hire a  writer who owns either a corporation or LLC versus a sole proprietorship.

If you plan to go into business with a partner, you might consider forming a partnership:

• A Limited Liability Company (LLC) offers the same liability protection as a corporation, but without the corporate tax and the required formalities, such as formal meeting and record keeping. In this structure, owners are called members, and they can pass profits and losses to themselves or elect to be taxed like a corporation.
• A Limited Liability Partnership (LLP) is a business structure for partners who want an equal voice in managing their business, but do not want equal share of liability.
• A Limited Partnership (LP) structure is for businesses that want to limit the liability and involvement of certain partners. This structure is popular with business owners who want to attract investment partners that want the profits of a business but not its risks.

The corporation or C Corporation is a complex business structure that is a legal entity separate from its owners, who own shares of stock. A corporation must pay corporate tax on profits and on dividends paid to shareholders, which means corporate income is taxed twice. In addition, a corporation must hold annual meetings, record the minutes of the meetings, elect directors or ratify the status of existing directors, and issue stock certificates. Setting up a corporation is costly, and you must work with a qualified attorney.

An S Corporation (Inc. or Ltd.) is identical to a C Corporation, but avoids double taxation. If a corporation qualifies for S status with the IRS, it is taxed like a partnership, not like a corporation. Income goes to shareholders, who must report the income on their individual tax returns.

After talking to our tax attorney, Melody and I thought an LLC was the best type of structure for our business.

Seeking Legal Advice

Before you start a business, we recommend that you talk to a knowledgeable tax attorney and visit such websites as the SBA (http://www.sba.gov/index.html) and the IRS (business section at http://www.irs.gov/index.html).

So what names have you chosen for your business and why? Please share your thoughts!