Business Formation - Ready for Greatness
Imagine this: You have a GREAT business idea and you're ready to get going.
What do you do next?
What you should do next is decide what type of business entity is ideal for what you are wanting to do and accomplish. Choosing the proper business entity for your business is vital to the success of your business idea.
With almost no exception, the best course of action is to organize as some type of legal business entity, not as a sole proprietor.
Do you want your home, personal bank account, and retirement savings on the line for a business liability? If the answer is no, then you do not want to be a sole proprietor.
What Type of Entity Is Best For Your Business?
Many factors come into play when deciding what type of entity is right for your business: the extent of protection from personal liability that you are seeking, the desired tax treatment of your business profits and take-home income, management structure, whether you anticipate adding future equity partners, capitalization, and more.
State laws determine how particular entities should be set up and conduct their business. These laws are very specific and set out the legal responsibility of each business form.
In addition, depending on your county and locale, other taxing authorities and regulatory agencies may also have regulations with which your business must comply.
We Turn Over Every Stone
We ask you the questions you may not even know to ask so that you do not worry that you are missing something.
And then we discuss your options with you in a way that allows you to know you are making informed decisions about the common questions that come up with proper business planning:
- Where to form your entity
- What type of entity to form
- How to set up your bank accounts
- What type of insurance you should have and how much you need
- Which agreements you need immediately and which can wait
- How to protect your intellectual property now and whether to own it in a separate entity from your operating assets
- How to work with your CPA for maximum tax savings, and more
A Quick Debrief On The Most Common Business Structures
- A general partnership is a business in which all partners participate fully in running the business and share equally in profits and losses. While forming a general partnership is easy (typically there are no filing fees or filing formalities), partners of a general partnership are typically all equally and personally liable for all debts and obligations of the general partnership.
- A limited liability partnership(LLP) is like a general partnership in that the LLP allows all the partners to take an active role in the management of the business. However, unlike a general partnership, the LLP offers partners some liability protection from actions of the other partners and the partnership and the partnership employees. LLPs are most often used by groups of professionals such as doctors, accountants or architects.
- A limited partnershipis a partnership comprised of one or more persons who control the business as general partners and one or more persons as limited partners who contribute capital and share profits but who do not manage the business and are liable only for their amount of their contribution to the limited partnership.
- A limited liability limited partnership(LLLP) is a limited partnership which registers with the Secretary of State as an LLLP. One benefit of registration is to limit the vicarious liability of the general partners in the same fashion that registration as an LLP limits the liability of the general partners of a general partnership.
- A limited liability company(LLC) is a statutorily created entity comprised of members with limited liability. Limited liability companies can be managed by either their members or managers. This is the most common form of entity formation for entrepreneurs and professionals.
- A corporationis an entity that provides limited liability for shareholders and centralization of management.
- An S-Corporationis not an entity type in and of itself. Instead, “S-Corporation” is a status for tax purposes only. Both an LLC and a corporation can elect S-Corporation status for purposes of tax treatment. S-corp status means that the entity is a “pass-through entity.” All profits and losses of the business entity are passed through to the owners on their personal tax returns in their respective ownership proportions, regardless of how much money was actually distributed to each owner during the calendar year. S-corp status is a favorite planning tool for many business owners because it allows you to take a salary (which is always subject to self-employment tax) but the distributions are not subject to self-employment tax, giving you the opportunity for substantial savings and more financial flexibility to continue building the business you love.
Ready to Exit or Think about the Legacy of Your Business?
As an entrepreneur, your legacy may be the most significant issue you think about when it comes to what matters most to you – your family and your work in the world.
After you are gone or in the event of your incapacity, your loved ones, family, business partner, clients, vendors, and others will miss you deeply. Your business needs to be able to go on to support them.
You will either leave them with a legacy that is meaningful, easy to manage or cash out, and keep supporting them -- or you will leave them with a big mess to deal with.
Time and time again, this issue is overlooked by business owners and business lawyers serving their business owner clients.
Our Ongoing Conversation
Once your business entity is incorporated and online with agreements, insurance, intellectual property planned for and protected, and financial systems filling the coffers, we shift the conversation away from set up to the all-important exit.
It's not the first time we will have discussed it as all of our business set ups are planned for based on your eventual exit plan, whether that is selling the business at a certain point, operating it for income as long as desired, or passing your business on upon your death.
We will have an ongoing conversation throughout your life and the life of your business.
We will explore together what can we do today to ensure your business can and will continue to serve you and your clients well whether you are on vacation, taking a health break, or when you pass it on to loved ones after you are gone.
In addition, through our unique legacy process, we will ensure you leave your loved ones a tangible expression of your love for them far beyond your money or even your business.
Capturing Your Legacy
Imagine you had a music album-length message from your great grandfather talking about his life during the Great Depression. He is talking about how he made his money, ran his business and the most important lessons he learned along the way.
Would that be valuable to you and your family today?
Of course it would.
There's no more valuable asset that we have than the lessons we have learned.
Most of these lessons are passed down from one generation to the next only inadvertently, not intentionally or consciously at all.
Imagine the wealth your family would have if lessons could be passed down consciously.
We know that the lessons of the past hold a tremendous amount of value and those who can harness those lessons and build on that foundation. Those who have figured that out are the most prosperous and have the easiest and most enjoyable lives.
Because we want this for your family too, we use a proprietary process for ensuring you pass on these most valuable lessons in the most conscious, direct, and clear way we know how.
If this interests you, please ask us more about it when you come into meet with us for your LIFT LIFT Your Life and Business Planning Session.
Contact us today to schedule your LIFT LIFT Your Life and Business Planning Session.