Corporate Structure Tips
Are you getting ready to start a business? You may have your business plan created, your financing secured and your key staff hired, but have you really thought about the structure of your company? You don’t want your company to fade when you encounter your first tax or legal challenge. Therefore, consider these tips for choosing your corporate structure.
Keep Intellectual Property Separate
This may seem like an odd tip, but it is important to separate your intellectual property from your company. Intellectual property may include your web address and phone number as well as any software you develop. If your business is sued, and these assets are not separated, you may lose them. Imagine doing business after having to change your phone number and web address. Every one of your customers and vendors will have to learn new information. A corporate trust can be used to hold these assets so your competitors cannot take them and benefit from them and your reputation.
Limit Your Liability
You definitely want a barrier between your personal assets and your business. You don’t want to have your personal assets awarded in a business lawsuit. One way to avoid this is to set up an LLC or corporation rather than a sole proprietorship. Although you will find it easier to manage a sole proprietorship, your personal liability is significantly higher. A limited liability structure also suggests that you are doing more than just seeking a personal income.
Another great way to place a buffer between the two is to establish a business trust. A well-structured trust gives you control over your business, but it severely limits your personal risk. Although some are expensive, most business owners only spend a few thousand dollars to start a new trust for their companies.
Start a Solo 401(K)
If you are looking for additional protection, a solo or self-directed 401(k) is a great option. Not only do you receive tax breaks for investing in a retirement account, but the money is secured legally. Someone who sues your company cannot be awarded money from these accounts. In addition, you can save more than $50,000 each year. These accounts are great opportunities to prepare for the future and protect you in the present.
You are in a very exciting period, getting ready to start a company you are passionate about. You may also be a little apprehensive, especially when it comes to your liability. However, you can protect yourself by adopting a corporate structure that protects you and your assets. Give your company a firm foundation and watch it blossom and grow.