Entrepreneur's Beware!

by Sandy Pensner

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Published on this site: September 1st, 2009 - See more articles from this month

For most entrepreneur's, there is nothing more exciting than starting your own business. Working for others may be a necessity so you can get on your feet, gain some experience and a book of business, and move forward securely, but it is hardly the ideal for a true entrepreneur who has the spirit and passion to go out on their own.

While this entreprenerial spirit can be positive, and indeed most of the great pioneers in American history have been truly entrepreneurial in nature, this personality type does lend itself to some signficant flaws. Primary among them, entrepreneurs are often too positive in nature, too willing to take on risks that maybe they should not, and too passionate to move forward without often doing the necessary research to do so in the best manner possible.

This is often true with regard to the structure of the business. Indeed, many entrepreneurs do not even bother incorporating. Especially for an online venture where it is simply too easy to open a new website to try selling a new product or service, the process of incorporating can seem to just "get in the way" of going ahead and making money!

However, there are some very important advantages to incorporating a business, and a good entrepreneur would be wise to take heed before moving forward. One advantage is that if your business is a limited liability corporation, this means your individual assets are not at stake as they would be if you were the sole proprietor. As a shareholder, your risk is determined by the amount you have invested. What belong to the company belongs to the company, and what belongs to you belongs to you-- you will not be risking your own personal assets.

Second, there are some tax advantages to incorporation. When your business's tax credit is applied, your taxable income is likely to be significantly lower than it would be without this business deduction. You will also be eligible for tax deferral. While these are important points in general, they are even more beneficial to a business which is relatively new and not yet secure in its financial assets. When your business is incorporated, dealing with your annual income taxes will involve a little less money and much less worry.

Incorporating your business has the potential for helping your business to grow. This can cover a variety of aspects from attracting more customers to making more sales to having your business more widely recognized. Your small business simply has the potential of doing more business and better business if it is incorporated. While it is not a guarantee, there usually is a much higher responsiveness to a limited liability corporation than to a business that is a sole proprietorship.

If you have decided, or are considering, incorporating your small business, it is wise to seek assistance from an attorney. While incorporating your business is not extremely difficult, there are many steps and much paperwork necessary for this process, and the process will be easier and accurate if you do not try to do it all on your own.

All in all, the entrepreneurial spirit and the American Dream are what keeps this country moving forward. It is wonderful, and nothing should take that away from a true entrepreneur. But, that does not mean that you should not move forward with caution, and with respect to first setting up your business structure properly and legally, could mean the difference between success and failure.

Sandy Pensner has been an entrepreneur for a number of years, and has set up numerous entities. She lives in Atlanta, Georgia, and consults with
FormACorpGA as well as Persily & Associates.