Words can’t describe how important it is that business owners separate themselves from their business. If you don’t understand why you should never co-mingle your personal and business activities, please continue to read, do some deep research or get sued by a business creditor and see how far his attorney will go to take everything you own personally. It’s not a fun route to travel on. Let’s do it right the first time and start to learn ways of separating yourself from your growing enterprise.
Here are a few things you can do. Get some business cards with a logo. Start a website and direct your customers there. Get a phone number for your business so you don’t have customers calling your cell phone at all hours of the night.
If you would like to just do business without actually filing any paperwork you can, technically. You would become a sole proprietorship. If there are more than one of you doing business together, you can be a partnership. If you actually want your business to become a legal separate entity then you would need to do a little leg work. If you just want to start selling something and leave yourself open for lawsuits then a sole prop is probably okay.
If you want to truly separate yourself from your business by forming an LLC or a Corporation, you have to actually do some work to gain that status of complete separation. Your state will require documents to be completed and filed with them to establish an LLC or Corporation. You will also need to deal with the IRS and get an EIN issued to your business.
If you elect to run your business as a partnership or sole prop then you are fully responsible for all business obligations including commitments made to employees, customers and banks. That’s right, you will be responsible for the business’ debt if creditors show up at your door.
The most important reason for choosing to form a limited liability company or a corporation is to give you, as the business owner, some liability protection for dumb (and often uncontrollable) things that happen within or as a result of your business. Because there are so many different strategies and types of LLCs and Corps, I would highly recommend consulting with a professional before pulling the trigger on the formation. In my opinion, complete separation is Business 101 and shouldn’t be overlooked or taken too lightly.
Jared writes articles about offshore company incorporation and teaches people what to know about set up llc
