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Your business structure is essential in the expansion and scaling of your business. When you hear people talk about using their business to purchase cars, real estate, get funding, and more, this is because they understand the proper structuring of business to gain leverage.
This isn't a get-rich-quick strategy in any shape or form. You will need to invest in the development of your business and its structural needs. One of the first things that you will need to do is calculate your expenses and make sure that you are financially able to invest in your new business venture while still being able to maintain your lifestyle.
We understand that most people are eager to leave their 9-5, but in order to be successful at becoming a full-time entrepreneur, you must "plan your exit strategy" accordingly. We always suggest staying at your job and using it as a means of leverage to help build your business until it's finally time to leave.
Next, you will need to get your legal team in order. We consider your legal team as being your tax preparer, accountant, mentor, and small business lawyer. These people hold the key to helping you build and protect your empire.
Always remember that "Proper Preparation Presents Success."
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The business structure you choose influences everything from day-to-day operations, your ability to raise funding to taxes, and how much of your personal assets are at risk. You should choose a business structure that gives you the right balance of legal protections and benefits.
Step 1.
If you're a Sole Proprietor and your business is profiting $1000+, now is the time to upgrade your business structure to an "Operating Entity", such as an LLC or Corporation. Always consult with your Tax professional or CPA before doing so. By forming an Operating Entity you have the best protection coverage, tax advantages, and the best chance to scale and sell your business.
Step 2.
It’s wise to have a “safe place” aka a Trust for your new business so that when challenges arise in the future you and your business assets will be protected and not threatened. Establishing trust is a great way to create such a safe place, and it can provide an array of other benefits. Most people prefer their trust to be owned by their LLC for privacy, asset protection, avoiding probate, and other reasons. If you have a revocable trust, then in almost all circumstances it's recommended you make it a member of your LLC.
Step 3.
Separate your Intellectual Property from your business. New businesses think that they don't have intellectual property when starting out but that isn't true. Your website and telephone number are two main components that need to be protected. If for any reason, your business gets sued, your competitor can take your web address and phone number and use it to their advantage if they aren't protected.
You can avoid this by simply establishing a trust that owns all of your intellectual property, and licenses your assets to your business. This separates those assets from your business in the event your business ever faces any problems, and also could create some tax reduction possibilities.
Establish a Solo 401k plan for your business, aka a self-directed 401k. This is a retirement plan only available to small businesses. It allows you to stash away as much as $50,000 or more per year and get huge tax deductions. The money you place in a solo 401(k) is, from a legal perspective, extremely secure. If you handle the account correctly, almost nothing can touch your 401(k) savings, including bankruptcy, lawsuits, and even the IRS.
Step 5.
The name of your business matters. When naming your business please keep the financial institutions in mind. Banks and traditional lenders prefer to lend to certain types of businesses more than others, and if you need to get funding for your business, you must bear this in mind when naming your business.
RESOURCE/TOOL YOU CAN USE TO HELP YOU STRUCTURE YOUR BUSINESS: 👇🏽
Use this simple, easy-to-follow list with links to help structure your business and gain the leverage you need to scale your business and save yourself some money by doing it on your own.
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