When we speak with clients it becomes very clear that we are all fed the same lines from our Baby Boomer parents at one point or another. Graduate, go to work, retire, and collect a nice pension and a gold watch. YEAH OKAY BUT NO.
This is no longer how the world works, not even close. My father was a career man; spent thirty years working at Delta Air Lines only to be served a fifty percent pay cut when the company went bankrupt. Because the pilots caused the bankruptcy right… sigh. He could have made excuses, but instead decided to start his own business renting houses. He now has over twenty of them and has zero money drama in his life to put it conservatively. Sounds cool, but can you do it to? Absolutely!
His advice since starting his own business has always been the same, “Don’t get a job, create an income.”
In the “you economy” that now dominates the marketplace, each and every one of us has more earning power than ever before in more ways than ever before. We can drive our cars, deliver food, start a professional development company (wink), or sell our wares on Etsy. These innovations are wonderful; but what does it mean for someone wanting to set out on their own?
So, for the next several blogs, I will attempt to explain in plain English the various kinds of businesses out there and the structures and operating models that define how a business drives revenue and profit. Hanging on the edge of your seat? Yeah, I thought so.
So, let’s start with the most common three:
A sole proprietorship is the simplest and most common structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and the owner. You are entitled to all profits and are responsible for all your business’s debts, losses and liabilities.
PLAIN ENGLISH - You start a delicatessen and are the sole owner.
Limited Liability Company
A limited liability company (LLC) is a hybrid type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The "owners" of an LLC are referred to as "members." Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations or other LLCs. All profits and losses are "passed through" the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership would.