There’s more to a business structure than just deciding between an LLC, Sole Proprietorship, or S-Corporation. The type of business you pick is part of building a firm foundation. Your business’s structure expands upon that.
An LLC stands for Limited Liability Company and helps provide liability protection for you as a business owner. A Sole Proprietor is someone who owns an unincorporated business by themselves. And S-Corps are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders.
The type of business you are is essential since it directly impacts your tax status, how you manage income, and how your business is ultimately governed.
But there is more to consider, like liability protection. Does it make sense for you to form a holding company to create additional separation between you and your business?
You should also consider whether your business structured in a manner that allows you complete autonomy? And if it is structured in a way that offers you the maximum amount of liability protection as well as proper mechanisms for your exit strategy?
Have you considered the future of your business? Even if you can’t imagine ever selling your business, it is still vital to structure your company so that you can transition the ownership seamlessly. You might be thinking – I’m supposed to have an exit strategy? The answer is YES, you are, but that is a conversation for another day.
All of these are essential questions that you need to consider when you are starting your business.
Understanding the nuances between corporations and LLCs, multiple tax options, and different governance structures is overwhelming for many aspiring entrepreneurs. New business owners simply want to operate their business, sell their product or service, and make their customers happy.
I get it, and there is nothing wrong with that. It’s a familiar and reasonable feeling.
But there are certain advantages and disadvantages to each of the different business structures. It is in your best interest to understand this and put yourself in the best possible position for success.
Throughout my career, I’ve been privileged to work with many entrepreneurs to help them understand the benefits of a proper business structure. If this is something that has you feeling overwhelmed, I’d love to help you as well. Reach out to me today to schedule a conversation and see how I can help you create a structure that fits your specific business. Please shoot me an email at kent@kentgustafson.com.
Schedule a one-on-one call with Kent to create a financial plan with lasting impact.
