What You Didn’t Know You Didn’t Know.
Article Courtesy of Evangela Childs Visionary Founder/CEO of BOMB MoM International Inc.
Today’s world is full of aspiring entrepreneurs that dream of attaining “The American Dream” through owning their very own thriving business.
The dreamers of today brainstorm their business names, they figure out what they want to sell to their potential clients, and some even go as far as to search for overseas vendors to make their business ownership dreams come true.
However, while the dream of owning your own business is not elusive, there is one thing that enthusiastic entrepreneurs often overlook!
How you choose to legally form your company can be vital to the success of your company. Because statistics say that most businesses fail within the first five to ten years, it is very important that all aspiring business owners consider the things that can lead to new business pitfalls.
Choosing the wrong type of business formation can lead to legal sometimes even financial issues. Picking the right entity can not only save you taxes, (which we all love) but can provide you the access to your very own “American Dream”. Below is a summary of the most common entities businesses choose between:
Types of Business Entities
- Sole proprietorship: Unincorporated business with one owner or jointly owned by a married couple
- General partnership: Unincorporated business with two or more owners
- Limited liability company: Registered business with limited liability for all members
- C-corporation: Incorporated business composed of shareholders, directors, and officers
- S-corporation: an Incorporated business that is taxed as a pass-through entity
- Nonprofit: Corporation formed primarily to benefit the public interest rather than earn a profit.
Choosing between these entities can often be overwhelming and as a result, overlooked and not given the true consideration that the choosing process deserves. Let’s start with what many business owners choose, sometimes by default, the sole-proprietorship.
Sole-proprietorships, as well as general partnerships, are the most affordable entities to form. While that may be quite an appealing factor for a new business creator with limited funds, let’s take into consideration the main reason why.
- These entities provide little to no protection of personal liability should anything take place within your company and you find yourself owing more than you have to give.
- Although the formation cost is more, corporations, in contrast, were created to provide protection to business owners that could allow you a certain level of freedom to grow your company without the worries of losing everything you own. As long as there is no comingling or mixing of personal and business assets a business can stand on its own as it’s own “person”.
As a representative of a corporate entity, you as the owner can apply for bank accounts, secure credit, and open vendor accounts all in the business’s name. As your company grows you can even purchase a car or purchase property. Managing your assets well can lead to true wealth within your company and as a byproduct, provide you with the lifestyle you desire.
As you can see, you have a lot to consider when it comes to choosing how you wish to form your company. You may decide to start out as a sole-proprietor then change over to a corporation as your company grows. No matter what you choose, you must choose and choose wisely. Be sure to do your research, even talk with a lawyer and a cap about what entity would be best for you. The most important thing to take from this is to know your options so that you can truly embrace your full potential.
Just remember that as a future business owner it is always your job to find out and make the best choices to fulfill your ultimate dream of owning your piece of the “American Dream”.
Evangela Childs Visionary Founder/CEO
BOMB MoM International Inc.
Evangela Childs Visionary Founder & CEO
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