[YWH S1E12] Joe's Journey: A New Business from Scratch, Part 2
The only certainty in life is death and taxes. Cynical, but true. I have yet to meet anybody that has gotten out of here alive, and every one of us pays taxes along the way, even in death, thanks to estate and inheritance taxes. With so much of our hard-earned income going to various taxes, we must protect the assets we have gained. When brave entrepreneurs venture out in the world and start businesses, they typically do so in an effort to provide needed products or services to the public, create jobs in their respective local economies and provide a better future for their families. Often they utilize personal savings and collateralize personal assets, such as their family’s home, to secure loans in an effort to raise the capital needed to start a business.
Insurance products were developed in an effort to indemnify the insured for specified damages or losses in exchange for a monthly premium. We all have some level of insurance; health, life, car, homeowners, etc., designed to protect our assets, limit our legal liabilities and preserve our ability to provide for our families. Along the lines of protection, there are 4 main types of Business Structures with some sub-types; Sole Proprietorship, Partnership, LLC and Corporation. Some structures can help protect owners from personal liabilities, and in the case of an S-Corp, protection from “double taxation”. Each structure has its advantages and disadvantages and thus, each should be explored before deciding on a particular structure in an effort to find the right fit for an owner’s particular situation. It is not uncommon to structure a business in one way, such as a Sole Proprietorship when one starts a new business, then change the structure as the business grows, such as to a Corporation.
When one has a serious illness, they go to a doctor, because a doctor is educated and trained in the diagnosis and treatment of illnesses. When it comes to the formation of a business, turn to the experts, both an attorney and an accountant. Each can evaluate an owner’s current and intended future states, then recommend an appropriate business structure to fit your specific needs. Money can be tight when starting a business and if your business requires a physical location, thus a construction project, it very well may run over budget. When it comes to hiring experts, don’t cut corners, look at the initial cost of an attorney and accountant as an investment in your future, you’ll be glad you did.
We are all good at something, which in the case of entrepreneurs, is usually the catalyst that sparks the formation of a new company. Be humble and surround yourself with trusted advisors that can support you in areas you may not be so good at such as the legal environment and taxation. The taxes you save today and the separation of personal liabilities will support your family tomorrow. Investment in a trusted advisory team will pave the way for a bright future.
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