Get it right the first time

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Running to the secretary of state to get corporate filings is not the first step in developing your business.

Incorporating before your business has an identity is like getting a marriage license before you decide on a groom. You will likely have to start over.

First, determine: Who are you? What do you want? What is your growth strategy? What is your exit plan? 

Second, talk with advisers including: your lawyer, business mentors, tax professional, business partners. Gather information to use in determining an organizational chart, managerial structure, initial investors and future direction.

Finally, look at the types of business entities:

• C Corporation
• S Corporation
• Professional Corporations (PC)
• Limited Liability Company (LLC)
• General Partnership
• Limited Partnership
• Limited Liability Partnership (LLP)
• Sole Proprietorship
• Trust

Yes, there is a right time to get the real security of a business entity. If you are inventing, dividing profits or shopping ideas, you may want and need the protection of limited liability. Additionally, if you are beginning to negotiate contracts (even "little" contracts like your cell phone), you want your business entity in place. It is easier to have assets and liabilities in the name of your entity from the start. . . if you do it right the first time.

Like a good marriage, your business entity will need maintenance to go the distance. Like a marriage, it is easier to care from the start than to fix the problems. 

- Christine Branstad

Comments

[Todd Razor]

Great post Christine. The brevity and clarity alone make it a good read. But I especially liked the way your framed the article with the marriage analogy. And the additional links provide great value to your readers. Way to go.

[Rush Nigut]

Christine,

Nice post. Business owners should also prepare for the divorce by signing a buy/sell agreement at the outset of the business entity. While the choice of entity is important, the buy/sell agreement perhaps does the most to help owners avoid problems down the road. Not trying to be cynical but the reality is every business relationship is going to come to an end at some point, whether through a dispute, retirement, death, or other circumstances.

Rush