You may be wondering, “Ugh, what’s a ‘business entity’?” “Do I really need to set one up?” The only answer here is “HELL YES YOU NEED ONE!” This is crucial for protecting your family and your business. Primarily they help you in these four ways:
- It can protect personal assets from getting taken away from you if someone tries to sue you.
- It can set up how your company will be taxed, potentially saving you thousands of dollars per year.
- It’s a way to legally set up who does what within your company.
- Some of the business structures command greater ‘respect’ from banks, allowing you to get a loan when you may not get one without a business structure.
Let’s say you opened up ‘Holy Awesome Donuts’ without setting up any sort of business entity. (This automatically makes you a ‘sole proprietor’, which is technically a legal business entity. A sole proprietorship lacks the benefit of protecting your personal assets from lawsuits involving your company.)
Then one day a man comes into your shop, falls and smashes his head into your donut display case, giving him an expensive trip to the ER. He sues you for damages plus pain and suffering (Of course). You lose because the judge found you negligent for X reason.
Well, in this case, you were sued for not just the business assets but your PERSONAL assets as well. You lose everything. Now you can’t send your 2 kids to college because you are jobless, you lost the house and the business so now you can’t make enough money in the meantime to have enough to pay for college tuition. TRAGIC!! That’s very bad business management and planning.
This could have been easily avoided if you had a business plan that set up your company with a protective shield such as a Limited Liability Company or an S Corporation. Either of these entities would have protected your personal assets from being acquired in litigation. You would still have your home, vehicles and your savings accounts because they are protected by the business entity.
See below for an easy to understand guide of the pros and cons of each. Whatever company you choose to help set you up will clearly explain the benefits and drawbacks of each type of business structure.
|LegalZoom is our top pick for your business entity needs. With LegalZoom, starting a LLC is quick and affordable, saving you up to 85% from what an attorney would charge you. Their 3-step online process and affordable pricing makes the file LLC online task a pleasurable experience. They offer cheap LLC formation to help save you money.||Price. Unlimited Customer Support. Nationally known. Forming an LLC takes as little as 7 business days. 100% satisfaction guaranteed.||No real downside to using LegalZoom.|| |
|As a pioneer in online business formation services, BizFilings offers a competitive package for setting up an LLC online. BizFilings is a great alternative to the other companies for online formation services.||Free six months of registered agent service. Guaranteed filing accuracy. Online chat and toll-free customer service phone assistance available.||LLC Operating Agreement and other LLC forms are not customized to your business.|| |
|With over a century of experience, The Company Corporation specializes in limited liability company formation and business incorporation services. However, their pricing isn't super-competitive when it comes time for creating an LLC online.||Exclusive $50,000 Corporate Veil Guarantee. Standard expedited service for states that offer this. Standard 6-12 months of Registered Agent Service.||LLC Operating Agreement is an additional cost. State fees tend to be higher than other online limited liability company formation services.|| |