Are you operating your business as a real business or as a hobby? It’s time to make your business OFFICIAL before the summer business rush!

Let me ask you two important questions:

  1. Are you operating your business under your own name, a DBA, or a fictitious company name, basically as a sole proprietor or perhaps as a general partnership? ME
  2. Are you or your family at risk due to business or personal assets that are not protected against unexpected loss or legal problems?

If you answered YES to any of the questions, read on for important news on why NOW is the time to form a corporation or LLC for your business.

  1. Make it official. Operating as a sole proprietorship or general partnership sends a message that you’re still “trying out” your business, or not sure you’ll really make it. Perhaps your accountant told you that incorporation is an unnecessary expense or that it won’t help you save on taxes because of low profit expectations. This is the WORST marketing message you can send when you want to attract new customers and partners to your business, who want to make sure you are dedicated to your business and here to stay.
  2. The Law of Attraction. You get what you focus on. Trying, waiting and “seeing if things work or not” BEFORE you decide to step up and make your business official by incorporating sends a clear message to the universe that you are not really serious about your business or committed to it. with a positive result. . The Law of Attraction states that the universe does not return what you want, but what you program into your deepest belief system through your dominant thoughts, actions and feelings. Making your business official and really stepping up says, “I’m ready to receive!”
  3. Limited Personal Liability. You may be thinking “I already lost everything in the market crash of 2008” and I’m still recovering. If you are one of the few who managed to survive and grow your assets since then, but still hold them in your name, you are playing a VERY RISKY game (similar to those with assets in unstable European banks). Even if you don’t have any assets right now, a lawsuit or judgment will destroy any credit you’re looking to build in the future PLUS you may be looking over your shoulder for years hoping someone will come after you when you finally get started. to change things. That’s no way to live your life. An unprotected business lawsuit can ruin your chances of getting a personal auto loan or refinancing your home. Good people who “play by the rules” can still get sued for the most unexpected reasons. You may be thinking “my business insurance will help me”, but is it really covered? Even if your business never gets sued, what if you can’t pay a supplier and they go after you? Do you want to be personally responsible? Put an end to greedy people who seek to take what you have worked for! This is the best time to form an LLC or corporation to limit your personal liability.
  4. Reduce your taxes. The bottom line is that operating as a sole proprietorship will cost you more in payroll taxes (up to 15.3% on earned income up to $113,700 in 2013). That means your income will be taxed at the HIGHEST TAX RATE possible as a sole proprietor. By the way, filing a Schedule C (the form filed for sole proprietorship earned income) also means your business is among the MOST LIKELY TO BE AUDITED. Why? The IRS has a $300 BILLION tax gap and they believe the biggest tax dodgers are small business owners like you. Why? Their statistics show them that sole proprietorships are MOST likely to UNDERreport their income and OVERREPORT their expenses (two big no-no’s with the IRS). Operating as an S corporation or LLC taxed as an S corporation in many situations is a much better approach for two reasons. You will have part of your earnings as distributions that are NOT subject to the 15.3% employment tax AND you will move that earnings to Schedule E, not Schedule C, which is more likely to be audited!
  5. Access More Financing Options. Operating as a sole proprietorship or general partnership limits you when it comes to financing options. You are also DAMAGING YOUR PERSONAL CREDIT SCORE by trading this way. How do you finance your business as a sole proprietor? Use your PERSONAL CREDIT cards which will increase your revolving debt which in turn will LOWER your personal credit score! When you form a corporation or LLC, you WILL SEPARATE your PERSONAL and BUSINESS CREDIT. Yes, any type of cash financing with a personal guarantee will come into play, but that DEBT does NOT show up in the personal credit bureau, which is HUGE for future financing! As you form a new LLC or corporation, NCP will help you (if you wish) quickly build your business credit scores and put your business in a position to secure financing to grow. But the first step is to form a separate legal entity.
  6. Simply your life. Yes, in fact operating as a sole proprietor will make your life difficult, not the other way around. Separating your business and personal life will make it much easier for you to navigate both financially and legally. You will now have each one in its own compartment where it belongs to protect your overall success.
  7. Asset protection. Forming an LLC for your safe assets as investments (those outside of a retirement plan) will help you sleep better at night knowing you don’t have all your “eggs” in one basket. If you are using a LIVING TRUST to protect your assets, that will NOT work and everything in your trust may be vulnerable. Do you own other businesses that really should be operating through a separate bank account in a separate entity? Do you have real estate in your name that may be sending a message that you are wealthy and have assets worth taking? Have you been in business for years or are you operating more than one business in one entity? Are you doing business with a new partner and making the big mistake of running that revenue through your current business? Avoid these costly mistakes and form a separate company for that separate business.

Leave a Reply

Your email address will not be published. Required fields are marked *