You’re starting a business? Congratulations. Did you set up an entity? Should you?
There’s plenty of hoopla these days about setting up a limited liability company or a corporation. If your goal is to build a business for the long-term, it probably makes sense to set up an LLC or other entity. That’s especially true if you have visions of eventually selling your business or getting other people involved because you want to have a separate legal entity that hosts your assets and liabilities. And it makes it easier to add people to your business later.
If it’s only you and your business, the decision whether to set up an LLC or corporation depends on your circumstances. If you’re the only person providing services in your business, you often will be liable for the services you provide. You cannot hide behind the entity if you’re the one providing the services.
Will there be times when people might interact with your business when you aren’t directly involved? A slip-and-fall accident at your office is an example. An entity may be your protection. In many cases, the indicators will point toward forming an entity. The good news is setting up an entity is inexpensive and it provides a great deal of liability protection for your business long-term.
If you choose to wait to see how your business develops, remember that as soon as you start adding employees or others to your business, you definitely want to reassess. You will want an entity in place when you hire your first employee. If other people are providing the services – not only you — then the entity protects you and your personal assets.
What’s your experience? Have you struggled with the decision to form an entity? What did you do? Join us in the comments below.
Each case is unique. Past results do not guarantee future outcomes. This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. FreeImages Photographer Stephen Stacey.
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