Business Owners tend to identify themselves with their business. They show pride in the name, the function and the growth of their business. After all, it’s their ‘baby’. But there are three important reasons why your business and you should not be so closely identified: (1) Protection, (2) Privacy and (3) Capital Growth.

• Protection is Most Important.

Millions of business owners make a splash about letting the world know that they and the business are essentially ‘one and the same’. This is often seen in the number of ‘Sole Proprietors’ out there who set up shop with a business checking account, some business cards and a fictitious business name (‘DBA’ or ‘doing business as’) filing with their County clerk. The risk, of course, in being a Sole Proprietor is that you and the business are legally ‘one and the same’ and thus all of your personal assets are at risk in the event of a business reversal or a lawsuit.By protecting your business inside of a legal entity, you are taking a step in the right direction to separate you and the identity of the business. Corporations and Limited Liability Companies are two much better ways to organize your business. For years, corporations have been ‘top dog’ but now the Limited Liability Company (‘LLC’) is emerging as the preferred entity of choice by business owners and investors everywhere, due to its simplicity, flexibility, protection and tax advantages. By using a company (whether corporation or LLC), you are not the business (for liability risks) and it is not you. The business can and should stand on its own – so that your personal assets are not at risk. Today there are more LLCs being formed than corporations. The emerging ‘Series LLC’ represents the latest evolution in company formation. The series LLC helps to keep legal and tax accounting costs down but provides for separate business enterprises operating within the same LLC ‘mother ship’. Each series or cell can have its own business operations, its own liabilities, its own blance sheet. And yet, at the end of the year, all of the cells or series can be conslidated into a single tax return. Very Nice.

• Privacy Should Not Be Overlooked

Identity theft is the fastest growing crime there is in America. A thief can use different methods, but their goal is always the same – to profit and benefit at your expense, using your identity. One of the best steps you can take to reduce your risk and increase your personal financial privacy is to utilize an entity such as an LLC.The name of the LLC or corporation should be different than yours. It can have its own Tax ID number, its own business credit profile and credit rating, its own credit and debit cards, its own vehicles and equipment, and it can separately own both real estate and other property from you. The entity and you should have separate bank accounts and separate financial identities. The less you ‘co-mingle’ personal assets and business assets the better.

• Obtaining Business Credit

In the early formation and start-up phases of most business, it seems as though every vendor and every provider wants you personally to sign for and be responsible for any business-related purchases, leases or credit. This can put tremendous burden on your personal credit – and in fact if used in the wrong way, it can seriously damage your personal credit by doing so. Building credibility for your business should mean building a business credit rating and credit profile that stands alone, separate from your own personal credit. Most small business owners simply take the ‘default decision’ that they must personally pledge payment of business-related leases, purchases or other financial obligations. But this does not have to limit you.There is another way. By using a corporation or LLC instead of an unprotected sole proprietorship, you can begin establishing a separate business identity. That business identity can in fact have its own credit profile and credit rating, and this will serve to help take the pressure off of your own credit. By doing so, this frees up your own personal credit so it’s not carrying the burden of your credit needs as well as your business credit needs. Every journey begins with a single step. To get started, see www.OneMinuteTaxCoach.com

Michael Potter, Esq. is a familiar face to many business owners and investors who’ve seen him speak at business conferences and investor workshops. His Integrated Planning law practice is focused on Asset Protection, Business and Estate Planning, Tax-Advantaged Wealth Accumulation, Accelerated Retirement Planning, and Multi-Generation Legacy Planning. To learn more, visit OneMinuteTaxCoach.com

See: http://www.OneMinuteTaxCoach.com

Copyright 2007 Michael L. Potter, Esq. All rights reserved.

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