Choosing a Legal Entity – Part 1

Choosing a Legal Entity – Part 1

Choosing a Legal Entity

One of the first decisions is which legal structure is best for you. If you are completely new to being a business owner, the options may appear confusing and over-whelming. This is the single, most important decision you will make – don’t attempt to make this decision alone. This is where that trusted attorney will be your best resource. There’s no blanket answer for everyone. Every state has their own laws that will protect you from lawsuits. Consequently, those same laws may open you up for a lawsuit because of the way they are written.

To complicate matters more, whichever business entity you choose, there will be tax consequences. Those tax consequences will be based on your individual financial profile. This is where a talented tax accountant joins your legal team to examine which entity you should choose. They will be interested in your assets, your marital status, the number of children you have, if you’re going to work at this full or part time? Two firearm instructors would likely receive two different answers based on these and other factors that will be important to the accountant.

So, here you are thinking you are starting your own firearms training business only to discover you now have two silent partners! They’re not “Partners” in the business per se, but they are a necessary team of professionals that you will absolutely need throughout the life of your business. Your initial investment in time and money will save you from losses in the future. Plan on asking your attorney legal questions and the accountant on how to manage your money. As your business grows, you’ll need their professional advise to manage the business as it reaches higher tiers of exposure and income.

Types of Entities

There are essentially five types of legal structures to choose from:

  • Sole Proprietor
  • Limited Liability Company (LLC)
  • Corporations
  • S-Corporations
  • Non-profits

Not all states will have the same titles but they will have basically the same structure.

As you and your team work through the options, one thing you will want to keep in mind: Exposure! When we refer to exposure, its everything you hold near and dear; everything you own. Take a moment to reflect on the line of work you are entering. Take a pause to consider what could go wrong? And guess who gets to pay for it – you! You’re not exactly considering a low-risk business venture.

Exposure has to be kept to a minimum.

Before you and the team get together, you should have a basic understanding of how the legal entities work to protect or expose you. Each state is different, so be sure you understand why the attorney is making his recommendation.

Leave a Reply

Your email address will not be published. Required fields are marked *