How You Could Kill Your Business Before Even Starting It
- Chris’ Weekly Word
What’s your Babysitter up to on her own time…and does it matter?
I’m not going to lie to ya. This is not been the easiest week of all time for me and my family. We learned that our nanny was engaged in a side business that is mutually inconsistent with our concepts of being a caregiver for an infant. I’m not going to tell you what she was up to. Oh, maybe I’ll write about it later, when it isn’t so fresh.
I’ll only say this today. She’s been with us for almost 2 years, but she started this new venture six months ago. It has been described to us as “fringe.”
In the face of having to make a tough decision, we chose to fire her. It was not an easy choice, because we really, really liked her. Sometimes you’ve really got to boil down the basic factors of a decision. My analysis comes down to this question: If she had asked me for my blessing prior to starting the business, would I have given it to her?
The answer: No. I would have made her choose between the side gig and us.
So it was a week of tough, grown-up decisions, and difficult decisions take a lot out of your brain and leave you really tired. I’m glad I have really good advisors, good friends, a brilliant wife, and smart colleagues to help me through these transitions.
What’s your babysitter doing in her downtime?
And now for something completely different….
Top 3 Considerations When Choosing a Business Structure
Choosing the right business entity for your new or growing company is one of the most important decisions that you’ll make as a business owner, since your decision will impact important things like compensation and taxation. If you’ve given more thought to your company logo than the structure under which your business will operate, you need to realize what a disservice you may be doing your company and yourself in the long run.
Generally speaking, there are three key considerations that will impact your choice of business entity:
Risk management. In this litigious society, just about any business can expect to endure a lawsuit or two. If protecting your personal assets from potential business liabilities is important to you, then you need to consider a limited liability company (LLC) or corporate structure.
Taxation. Business owners whose companies operate as a sole proprietorship, partnership or LLC report their business profits and losses on their personal tax returns and net profits are taxed accordingly. A company operating as a corporation is considered a separate tax entity, so owners of corporations do not report their share of corporate profits on their personal returns. Although corporations are more complicated structures tax-wise, the lower corporate tax rate may be attractive to some business owners. Plus, if you are an employee of your own S-Corporation, you only pay self-employment taxes on the salary you pay yourself and all other distributions are not subject to self-employment taxes. The savings can really add up!
Complexity of management. Corporations and LLCs have greater complexity than sole proprietorships or partnerships, generally requiring more meticulous record keeping and rules that must be followed to keep the corporate structure (and asset protection) in place.
If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit. Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee.