Many people currently work are currently employed in a structure that can provide more financial freedom if they decided to turn there job into a business. The financial, real estate, and insurance industries are the three prime examples of these employment structures. This week in the Argent PlaceⓇ Review, we examine some of the articles that address why you should consider turning your job into a business.
If you have a great job, many people ponder why they should even consider starting a business. Darren Dahl lists ten subjective reasons for running you own business in the 2001 article titled “Top 10 Reasons to Run Your Own Business.” Let’s face it, you are allowing your company to control your destiny, and possibly even allowing them to reap the rewards of your risk taking.
As an employee, you always risk getting laid-off or retiring with few benefits, and depending on your job, you may risk even some personal liability. If instead you work toward growing your own business, you could minimize this risk and retire wealthy.
Of course there are risks in running your own business too, risks that are often misunderstood or ignored. But you can gain control of and reduce the amount of risks through proper education and planning.
Even if you have chosen to be an independent contractor, a route that offers some measure of independence, you may not have taken all the steps you could to protect yourself from certain liabilities. Insurance agents and real-estate agents are prime examples. You get leads from the firm you are affiliated with, but it’s up to you to maintain those leads, and you have to pay your own expenses such as your license, car insurance, travel expenses, client meetings and meals.
Unless you have registered your business, you are operating what is called a “sole proprietorship,” which is simple to start but is the riskiest form of running a business. There are alternative forms of owning your business that help you avoid some risks, take advantage of growth opportunities, and reduce your tax liabilities. The best known and most appropriate of these forms are the limited liability company (LLC) and the corporation. (By the way, the “S-Corp” is a separate tax-related concept that will be addressed in another post.)
In an article for Small Business Chronicles Tiffany C. Wright asks the million dollar question: Is a Sole-Proprietorship the Best Form of Ownership for a Real Estate Broker? In a nutshell the answer is: no. The example she provided was perfect: say you only have $100,000 worth of insurance, but an accident happens and the claim is for $200,000. As a sole proprietor you would be personally responsible for the difference. But if your business were a registered limited liability company, your company could be responsible for the difference and you wouldn’t have to worry about your personal assets being at risk.
Even though the focus of Wright’s article is on real estate agents, the discussion is applicable to other independent agents. Converting your business to a registered form (LLC or corporation) helps to reduce risk in some of these situations and offers other benefits.
Christine L wrote 4 Steps to Changing Your Business Structure for the SBA to give you a few more things to consider when weighing the pros and cons of making the switch from a sole proprietorship to an LLC or corporation. However, the steps she presented for the conversion are somewhat lacking in detail.
For more details on how to set up your own business or convert your existing sole proprietorship to an LLC or corporation you could do a lot more legal research, or you can contact an attorney to help you.
Argent PlaceⓇ Law is dedicated to promoting entrepreneurship and will make sure that you are meeting all of the necessary legal requirements to convert from sole proprietorship to a registered form of business ownership.