When it comes to starting a business, there are several different corporate structures you can choose, each with its benefits and regulations. Make sure you consider how you want your business to operate before choosing a structure, and put protections in place to ensure your assets are not at risk.
Build Your Business Plan
A business plan is essential for any new business. It serves as a roadmap so that you stay focused as your business grows. Additionally, it is used as a part of your application for any financing. Detailing the way your business is operated, explaining your products or services, and elucidating your marketing and financial plans are integral to securing a much-needed loan. Keep in mind that traditional lenders such as banks see certain business types as inherently risky. For example, real estate companies make banks more cautious than financial firms would. If you’re in an industry with such risk, you should do everything you can to make your company more appealing. Such as choosing a good name and making your ideas increasingly marketable.
Choose an Operating Entity
There are three main types of structures: sole proprietorship, corporation, or limited liability company. A sole proprietorship might seem like an appealing corporate structure because it is the easiest to manage. However, the company is then tied to your name which puts any personal assets at risk. You become personally liable for any company-related legal issues and are subject to very high tax rates. Additionally, having a sole proprietorship makes it difficult for you to sell your business. Try forming a corporation or an LLC instead. Typically, business owners who want some of the freedoms of a sole proprietorship but a degree of protection elect for an LLC. Choosing a corporation would make your business its legal entity, offering the greatest deal of personal protection with the caveat of increased taxes and paperwork.
Protect Yourself With a Trust
Both an LLC and a corporation have varying degrees of protection when it comes to personal assets. A trust can further mitigate risk by protecting your valuable assets, such as personal or intellectual property. Intellectual property is one of the signature pieces of any business. It could be your unique product or procedure or even be something as simple as your domain name. And in the event of a legal dispute, you’ll want to ensure that you retain creative control of your business.
Contact Array Financial to learn more about our business loans. Our large portfolio is sure to have something to offer your business, and we’re also able to tailor a commercial finance solution to meet your needs.