If you are starting a business, chances are good that you are particularly focused on choosing the right business entity. And while this is an important step, there are other things you must pay attention to before you make that decision.
What You Need To Do BEFORE Choosing a Business Entity
When starting a business, many entrepreneurs fret over what type of business entity they should choose. This is understandable because having a structure in place makes a new business feel more official. However, there are other things you should pay attention to before choosing a business entity.
“A lot of people get hung up on selecting a corporate entity,” says Estefan Encarnacion, managing partner EBL Law Group. “A lot of people feel like ‘I need to do a corporation or an LLC right away”
“I tell them, ‘Do you even have a business?’ Don’t just focus on having an LLC or a corporation. You need to understand what that is going to do for you.”
As the attorney points out, “There’s a cost [to establishing a business entity], it is expensive.”
Before choosing a business entity, Encarnacion encourages entrepreneurs to ask themselves “Does it make sense right now to do that?”
“What people don’t understand is that what you’re really doing is you’re trying to create a shield for your personal assets. But if you don’t have personal assets to begin with, why are you going to be wasting your money on it? It’s a waste.”
In Encarnacion’s experience, placing too much emphasis on choosing a business structure makes business owners “Shift their focus away from what’s really important, and more importantly, they shift away resources that you could use to do something else.”
“Focus on having a business first,” Encarnacion advises. “When that business has assets that you can protect, then you can choose a business entity.”
DISCLAIMER: The material on this website is for general information only and is not to be construed as legal advice or opinion, and does not constitute or create an attorney-client relationship between you and EBL Law Group.
EBL Law Group: Business Attorneys in Rancho Cucamonga
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