Tuesday, July 31, 2007

Choosing a Business Structure for Your Consulting Business

Earlier in the month I provided 10 tips when choosing consulting as a career change. The number one tip was, “If you choose to become a consultant, you will be in business for yourself. Act like one.”

One way to be a real business is to choose a business structure. You’ve seen company names such as “Joey Jo-Jo Johnson and Associates, LLC”, or “Out of This World Solutions, Inc.” What these businesses have done is gone through the legal process of forming a business structure.

Entrepreneur Magazine has an excerpt from a book they publish called the Ultimate Guide to Personal Finance for Entrepreneurs available on their website. The excerpt describes the financial benefits to having a business structure.

In addition to the financial benefits, you also benefit from liability protection with a business structure in place. Unfortunately, we live in a litigious society. If you are ever in the unfortunate position of being sued by a client or a third party, your business is brought to court, not you the individual. You merely serve as a representative of the company. If a judgment is made against your company, only the assets of your business can be subject to seizure.

Here are a few resources you can access to learn more about setting up a business structure for your consulting business:

There’s really no pressure in choosing a business structure. Once you choose a business structure you don't have to be stuck with it for the duration you operate your business. If your business grows or changes you can always go with a different business structure. You just need to make sure you file the appropriate paperwork in the state you reside in. If you are still not sure which business structure to choose, speak with an accountant who will be your best resource for choosing a business structure that is right for you.

Final note – you don't really need to go to a lawyer to set up a business structure. Legal fees for setting up a business structure can get very expensive. There are companies on the web who will set up a business structure for a flat fee. I can’t endorse any one specific company, but if you yourself have used an online resource to file a business structure, feel free to comment and let us know who you went with and what your experience was.

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