Continuing in our discussion regarding entity structures, we are going to end our discussion talking about building a strong foundation for your business. The way your entity is structured is critical for your protection personally and for the long term success of your business. Build your business with bricks not straw.
I have seen statistics that show that over 70% of business are single owner entities with many of these being sole proprietor’s. There are reasons for being a sole proprietor. If you have no worries about being sued and are not concerned with liability from your business then this structure is certainly a decent fit.
Some entrepreneurs go the sole proprietor route because they are unsure on how to properly set up their entity and they don’t want to pay someone to handle this for them. There are a couple of problems with not putting enough thought into your structure.
The first issue is from a tax standpoint. How much money in taxes are you leaving on the table by not having the proper entity structure for your business. For those that do it themselves, have you completed all the by laws and operating agreements for your company?
That leads me to the next problem. If you haven’t set up your entity the right way or didn’t consult the right people, you could be in danger of not being adequately protected if someone sues you for whatever reason. Don’t make the mistake of thinking that it can’t happen to you. A LLC or Corp is only good if you have filed all the right paperwork that goes along with. There’s more involved than just articles of incorporation. When it’s all said and done make sure that you are protected. Don’t take advice from a friend or family member and certainly don’t set up your entity a certain just because someone else you know did it that way. There is no hard and fast rule on this. It depends on your individual situation.
In the end, you want your business to be around and prosper. You want to make sure that you have you foundation built for a successful operation and also a foundation that allows for the right exit to your venture whatever that may be. This is an area you shouldn’t cut corners in. Don’t be the business owner with post-it notes all over your face wishing you wouldn’t have built your house out of straw.