When I decided to become an entrepreneur at the age of 22 in early 2008, I had done enough personal research and reading that I completely understood aBusiness Entity was going to be an “absolute must” for my business partner and myself.
My first entrepreneurial venture before deciding to become an internet entrepreneur was in real estate investing. My partner and I learned all the ins and outs of wholesale, lease-options and short-sale real estate investing strategies. Unfortunately, with the collapse of the housing market, surplus of inventory and a shortage of cash my business partner and I made one of the most difficult decisions of our lives; we decided that we had to close down. Our first entrepreneurial venture in real estate was not a failure but a well lesson learned. My short year as a real estate investor taught me not only a lot about real estate investing but also a great deal about the importance of forming a business entity, the protections that come with it and thetax benefits.
But what about forming a business entity if you’re an internet entrepreneur? Does it really matter?
What I Discovered About Business Entities in Internet Entrepreneurship
What I have come to discover is that, in the Internet Entrepreneur world, unless you’re masterminding with serious and experienced entrepreneurs, there is not much talk about the importance of forming business entities.
Forming a business entity in real estate was an absolute must for my business partner and I. There were just too many liabilities and we had to protect our personal assets from any possible business liability. But what does that really mean? Let’s face it! we live in a ‘lawsuit society’. Unfortunately, there’s people, and even other companies, who will jump at the opportunity to sue you and/or your company for monetary compensation if they believe you’ve made an infringement upon their brand. If you’re an entrepreneur of any sort in free enterprise you should take a ‘When I get sued’ not an “If I get sued’ mentality. Of course, this is not in hopes that someone comes and sues you one day. However, you do want to be prepared should the unfortunate event of a lawsuit ever transpires.
Think it can’t happen to bloggers? Why don’t you ask my good friend Ben Lang. Read his article about how he recently almost got sued by the New York Times.
Business Entity Formation Benefits I Enjoy
I first learned about company formation in 2007 and started my first business entity in 2008. In the U.S there are many business entity types but I decided to form a Limited Liability Company (LLC) for my current internet entrepreneurial ventures.
Here are a couple of the benefits I enjoy through my LLC.
- Asset Protection Through Anonimity – My LLC keeps my personal assets separate from my business assets. For example, if I was to ever get sued, my personal assets such as cars, house, personal income, investments, etc. cannot be lost through court order. If I was not protected through an LLC my assets would be free to relinquish.
- Taxes – I don’t pay any taxes on income earn that is offset by business expenses. For example, any business related expenses, such as business trip expenses, business furniture or hardware (i.e. computer/equipment), business training, etc. are offset from my earnings and cannot be taxed by the IRS. If my yearly business expenses are $15,000 and my income earned in a year is $50,000 the IRS can only tax me on $35,000 of my earnings. This amounts to huge tax savings! Can you buy computers, equipment, business furniture, business training, etc, tax free? I can!
Additionally, if you are still a full-time employee you can offset business expenses through salary income that you earned through a job to minimize income taxation. Here’s another reason to form a business entity if you’re a home business owner. If you own a home or rent an apartment some of your rent or mortgage can be classified as a business expense. This also includes any internet billing and business related cell phone billing. (Note: Of course, I cannot legally give you accounting advice. I am merely giving examples of what I have learned works for me in my business. You should always consult your accountant for any tax related questions)
How To Form A Business Entity?
There are obviously more business entity types for company formation such as corporations, partnerships, sole-proprietorship, etc. and you should do the required research and due diligence to find out what works best for you. An LLC worked best for my business and in the U.S, LLC’s seem to be among the most popular company formation entities for small business owners due to their ease of management and benefits. However, everyone’s business situation is unique and I would always recommend that you talk to your lawyer and accountant first to determine which business entity is right for you.
My first LLC was started through the consultation of my lawyer and, if you’re not familiar with business entity types or if this is your first company formation, I recommend you consult with your lawyer as well so that you can learn the legalities behind maintaining the integrity of your business entity.
If you’re familiar with this process, then I would recommend using web based services such asLegal Zoom. Legal Zoom is the prominent service for web based business entity services and, in my experience, has excellent customer service.
The sooner you start your business entity – the faster you start enjoying the benefits!
I made $20 for each 20 minute survey!
ReplyDeleteGuess what? This is exactly what large companies are paying me for. They need to know what their average customer needs and wants. So these companies pay millions of dollars each month to the average person. In return, the average person, like me, answers some questions and gives them their opinion.