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3 Things You Should Know About Small Business: Dec. 15

Stocks in this article: AXP

NEW YORK ( MainStreet) -- What's happening in small business today?

1. How to legally change the structure of your growing business. Your business is growing and now it's time to make sure that the legal structure of your small company fits with its size.

"Gaining protection against personal liability, seeking a break from excessive bookkeeping, dissolving a partnership and more" are among the reasons to think about a change, according to a blog on the Small Business Administration's Web site written by marketing consultant and small-business owner Caron Beesley.

The vast majority of small businesses are sole proprietorships and can be vulnerable to personal liability for business debts and obligations. Limited liability companies offer protection for the owners' personal assets in the event of lawsuit or debt. Business owners who are thinking of significantly growing their businesses or seek outside investment should structure the business as a C corporation, Beesley says.

Beesley offers details on how to switch between the various entities or dissolve a partnership if needed. Four steps should be on a business owner's checklist to change their legal structure, including registering with state and local agencies; registering with the IRS; reapplying for business licenses; and communicating the change to banks, insurance companies, customers and vendors.

2. What about closing a business? The economy is still struggling and small-business owners are bearing the brunt. If it's time to close your business, Small Business Trends provides some tips on how to best do that without getting in trouble with authorities.

Formally shutting a business isn't that complicated, but for tax purposes it's better to wrap things up before 2012.

Business owners need to make sure they dissolve their LLC or C corp; pay off debts associated with the business; distribute remaining assets to the owners; cancel permits, licenses or fictitious business names; and notify the IRS, among other things, the article says.

>>Government Contracting: Small Businesses Should Team Up

3. Federal contracting is down. What does that mean for small businesses? The U.S. government is the world's largest single buyer of goods and services, but even it is not recession proof. Federal government contracting spending amounted to $461 billion in fiscal year 2011, down 14% from the previous year, according to American Express (AXP) OPEN.

For the second year AmEx has surveyed 740 active small-business contractors to look at trends; it plans to publish the findings in four installments. Among what's already known:

Small businesses are spending more time and money to seek out federal contracting opportunities. On average they spent $103,827, up 21% from the previous year. But they are bidding less as the contracting environment becomes more competitive. Average success rates in prime and subcontracting have declined,.

Small-business contractors reported that they had to submit an average of 4.4 bids before they won their first prime federal contract. Once they succeeded, they wasted little time in trying -- and succeeding -- for more bids.

It is encouraging to note that AmEx OPEN believes that 2012 will bring more opportunity for small businesses to work with the government. There is plenty of opportunity for niche businesses, such as women- and minority-owned businesses and green companies, says AmEx OPEN's adviser on government contracting, Lourdes Martin-Rosa.

There is also "tremendous" government contracting opportunities in construction, engineering and architecture, as well as a high demand for IT services, Martin-Rosa says.

To follow Laurie Kulikowski on Twitter, go to: http://twitter.com/#!/LKulikowski

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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