How To Set Up Your Corporate Structure
When people set up businesses quickly, without a lot of skin in the game, they can do well for a moment and then quickly fade into oblivion. This is what’s commonly referred to as a “lemonade stand” business. To avoid this sort of thing from happening, you must set up your business for success from the get-go.
When setting up your corporate structure there are a few simple things you can do to help make sure it’s something that will last.
1. Don’t Always Default to Sole Proprietorship
A sole proprietorship is a company structure that is the easiest to set up; hence the reason why most small businesses create their companies under this structure, to begin with. While it is easy to set up, a sole proprietorship also indicates that it’s a side hustle meant to build some extra income for yourself but isn’t set up to become a larger endeavor.
Instead of going with a sole proprietorship, consult with your CPA or attorney to set up an LLC, partnership, corporation, or another type of business entity with the future in mind. Setting up your business as one of these other corporate structures gives you protection against business liabilities and debt, looks more professional to other companies you might interact with, and offers some tax benefits.
2. Split Your Company From Your Intellectual Property
Along the lines of protecting yourself from liability, even setting up your corporate structure like an LLC isn’t a foolproof guarantee that your intellectual properties aren’t at stake in light of loan default. One thing to remember is that you may have more intellectual property than you first thought. For instance, your web address and your telephone are considered intellectual property.
If you set up a trust that can own all of your company’s intellectual property, then if you get sued by a competitor they can’t take your homepage URL or telephone number away from you – since you’ve likely spent lots of marketing dollars to help build and establish in the first place.
3. Set up a 401(k)
There are lots of types of 401ks, but a solo 401k is an account that is only available to smaller businesses. This type of account allows you to put away nearly $50k a year and still get lots of tax deductions.
Not only that, these types of savings accounts are very secure and can help protect this money from any other lawsuits or bankruptcies that might occur.