Kick Start Your Success with a Business EntityBy Nina Kaufman, Esq.
Why open yourself up to personal liability when you don’t need to? Today’s query comes from someone wanting to know that fundamental first question: “What form of business should I be?”
Q.: I’m wondering what kind of company you would recommend for me to register under for a clothing company. I was thinking going Limited Liability because I would not be personally responsible if companies came after me for some reasons and couldn’t take my personal assets. Which one would you recommend because I don’t really know how much money I’m going to make in the first year.
A.: For all but a v-e-r-y few situations, I recommend that entrepreneurs form either a corporation or a limited liability company. There are simply too many variables and pitfalls in starting and running a business . . . so why leave your personal assets exposed?
Which form of limited liability entity you choose, though, depends on a number of factors:
- Where the business will be located
- How many people will own the business
- The nationality of the business owners
- Whether you will involve passive investors in the company, or want to take the business public
- The federal, state, and local taxes that may be levied against the entity
- The costs of formation
- Your exit strategy and what you want to get out of the business
Before you take the step of forming the business, make sure you’ve taken the time to calculate the kind of financial investment you’ll have to make in startup and ongoing costs. While 1st year’s revenue will be guesswork, you can have a more solid sense of what’s involved with the right financial planning. It will also help you decide whether the venture will be worth the risk and financial investment.
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