What Is The Right Business Entity For Me?

Entrepreneurs Need Good Counsel

Entrepreneurs are never quite certain when they first start out as to just which legal entity is right for them. Do they need an LLC, a corporation or maybe just a general partnership? That is perfectly understandable. What is not perfectly understandable is why they rely on the advice of their friends and family instead of seeking an independent legal opinion.

One of the beliefs that people have, and this applies not only to entrepreneurs, is that legal advice is costly. Just the opposite is true. It is costly not to get good legal advice before a problem comes up.

In this digital age entrepreneurs can go online and find almost everything they need to run a business. But the problem with that is, without the right information, a form is almost useless.

You Can’t Know Everything

There are great bookkeeping programs available on the Internet for downloading or purchase. But without some basic understanding of the principles of good bookkeeping entrepreneurs quickly find themselves in a sea of numbers with no idea where they go.

The same goes for leases. Entrepreneurs can go online and find quite a few sites that offer lease forms. The problem is, that without some knowledge of what should or should not be in a lease, they are exposing themselves to trouble down the road.

So why would an enterprising entrepreneur try, on their own, to determine the best legal entity for their business? I do not have an answer to that question but it happens all the time.

I do not give legal advice to anybody on this web site. But I do point out problems that can occur. The type of business you form is very important.

There are a few types of business entities that are regularly recognized.

What Entrepreneurs Need To Consider

The most common is what is called the sole proprietorship. That is the business that consists of just you. You are the sole owner of the business. It might have a name (I will talk about fictitious names in another post) that is different than yours. But it is just you and you have not formed any business entity.

That seems pretty simple. But it, like all businesses, has certain tax consequences. Do you know what those are? It has certain liability consequences. Do you know what those are? Well, if you don’t, how do you know this is right for you?

What if you are married? Is your spouse part of your business? Maybe, maybe not. It is clearly in your best interest to have the relationship in a written agreement. But, trust me, you are not going to be able to draw one up yourself. Not if you want it to be correct.

Pay a Little Now or a Lot Later

What I hope you see here is that in order to protect your business you need to have good legal guidance before a problem rears its ugly head.

Think about what you have read here. The choice you make about your business entity (LLC, Corporation, partnership, etc) is going to have a significant impact on your business model.

Associations of entrepreneurs hire me as a speaker to teach their members about how to avoid costly legal mistakes and those budget-busting attorney fees that go with them. If you would be interested in having me speak at one of your events, please contact me.