Why I Started My Own Company

So it’s official. I am now the proud owner of my very own business – and I have to say, it feels wonderful! It’s always been my life long dream to own my own business, so it’s nice to say that I was able to achieve this at the age of 26. But looking back at what I had envisioned my own business to be, this is not what I had in mind.

Before, I had imagined having my own office and leading a team of people to do a certain job – maybe an architecture firm, since I studied architecture in college. My company would be named Flynn Architecture or something of that nature, and I’d go all around the world Networking with people and examining all of the buildings my company had designed. Well, my company is not Flynn Architecture, and I don’t have an office. I don’t even have people under me. It’s just me and my company, Flynndustries, LLC.

Why Did I Start My Own Company?

Ahh, I’m remembering the one and only business class I took in College all of a sudden. Anyways…when you’re doing any kind of business, you have a choice – you can stay a sole proprietor, or you can incorporate.

The Sole Proprietor

A sole proprietor is a type of business entity which legally does not have any separate existence from its owner. If you make money online and don’t own your own company, you’re a sole proprietor. This is the most common business entity by which people make money online.

There are some disadvantages, however, by doing business as a sole proprietor.

  1. In a sense, a business is seemed to be more legitimate if it is not run as a sole proprietorship.
  2. It’s much harder, if not impossible, to raise capital in ways that a limited liability company or corporation can. I.e. bank loans and selling shares.
  3. It’s much more difficult to hire employees if the business requires them.
  4. As soon as the owner decides not to have the business anymore (or the owner dies), the business ceases to exist.
  5. It’s nearly impossible to sell a business as a sole proprietorship. It’s difficult because the owner’s personal assets and the business’s assets are one in the same.
  6. Along the lines of the last statement, and the real kicker and reason why I decided to form an LLC is because a sole proprietor will have unlimited liability. If the business is sued, the proprietor is personally liable.

There are, however, some advantages of doing business as a sole proprietor:

  1. A sole proprietorship does not have to pay corporate taxes.
  2. The person who owns the business will simply put their profits into their own personal income taxes, which makes accounting much easier.
  3. If the person who owns the business decides to do business under a separate name, it’s as easy as filling out a “Doing Business As” form, which will then allow the owner to open bank accounts for their company.

Although a sole proprietor is what I was for a good amount of time, now that I’m taking in more money, I’m also taking in more risk. I would hate to be sued or held liable for something and have my personal savings, my house, and my entire life be affected by it. Again, this is why I decided to form an LLC, or a Limited Liability Company, which gives me the risk protection that I’m looking for, but some of the benefits that a sole proprietor has as well.

The Limited Liability Company

A limited liability company, as I just mentioned, is a legal entity that offers limited liability to its owners. This entity is the one that is most suitable for companies with a single owner, like myself.

Here are some of the major advantages in forming an LLC:

  1. Of course, the limited liability. The owners cannot be held personally liable for company debts.
  2. Profits or losses pass directly through the owner’s personal income tax returns. In other words, the LLC itself does not have to pay taxes and you’re avoiding the double taxation that happens with you own a corporation.
  3. The tax structure is very flexible, meaning that the owner can choose the business to be taxed as a sole proprietor, a partnership or corporation.
  4. Distribution of money to employees, including the owner, is as simple as an online payment or writing a check.
  5. It’s much easier to raise capital and create accounts at bank institutions.
  6. It’s much easier to sell the business or a part of it.
  7. There’s far less paperwork involved when compared to a corporation.
  8. The credit history of the owner does not matter when it comes to the credit standing of the company.

All that being said, there are some disadvantages to forming an LLC:

  1. The LLC business entity is fairly new, and therefore some states do not treat LLCs in the same manner as corporations.
  2. Many states will require a tax just for LLCs. This is basically the “fee” that the company pays the state in order to have the benefits of the LLC.

So, with some careful thinking and planning for the future, I decided to go the LLC route. I wanted to personally thank a friend of mine for helping me get started and pointing me in the right direction: Ian Gordon who runs StartUpDaddy.com. His website has wonderful information about starting a business, and he even has a podcast running on his blog too. Please check him out if you have the time.

To Conclude…

I’ve gone over how it was my dream of to start my own company and also why I chose to form an LLC. I still have yet to tell you the underlying reasons why I really wanted to start my own company, which is what I’ll share with you now.

The reason I started my own company is because I want freedom. I want the freedom to make my own decisions and control my own destiny. Never more will a boss or anyone tell me how I should be creative. Never more will I sit at a desk for 8 hours a day with NO BREAKS. I will create my own schedules and if I fail, that is my own fault.

I want the freedom from worrying about finances. I want to earn infinite amounts of money proportional to how much work I put into my cash generating methods. I will NEVER earn less than I deserve.

Lastly, I want the freedom of time. I never want to HAVE to do anything or HAVE to be anywhere. Anything I do or anywhere I go will be a choice that I make in the best interest of myself and my family. I never want my work to hold me back from spending time with those who I love.

Thanks for taking the time to read that – it means a lot to me to share it with you and I hope you don’t see it as being corny or fake.

In my next post, I’ll talk about exactly HOW I formed my brand new company, Flynndustries, LLC and what I learned about the entire process.

Here’s to you.

  • http://chasingthebull.info Dusty

    I am looking forward to reading your posts on creating your own LLC. I am in the process of setting myself up as a LLC as well (well my blogging empire anyway). It will be interesting to see how differently we approach the same process.

    Dusty´s last blog post..I Do Not Like Oprah but I Love Suzie Orman – Get Your Free Book Now

  • http://www.passivefamilyincome.com pfincome

    Congratulations!!! As always – a very inspiring post. I will probably start my own LLC later this year and really appreciate reading this post. I have also always dreamed of owning my own business. I really like the name of your business as well.

    pfincome´s last blog post..PFI Weekly Updates – January 13 (2009)

  • http://genxfinance.com Jeremy

    Good post covering the pros and cons. A lot of people are moving in this direction especially with the low costs and simplicity in setting an LLC up.

    One thing I would caution is in regards to the liability part, especially when it comes to debt. For example, if you open up a business credit card or line of credit, you have to be absolutely sure that it’s strictly a business account. By default, if you go apply for a business credit card for a new business, while it seems like you’re opening up a separate business account because you use your business name and specify that it’s an LLC or corporation or whatever, in most cases what you’re doing is opening a business line of credit with a personal guarantee. This means that if your business fails, or you miss a payment, you are personally on the hook for that debt and any subsequent negative marks on your credit report.

    I only bring this up because I’ve seen people get into serious debt trouble because of this. They went on and started an LLC or corporation, and obviously took out some loans or got credit cards to help run the business. And when their business failed, they had assumed that because they were smart enough to create an entity that had limited liability, that those debts were exempt. Well, they are always quite shocked when the creditors start calling and their credit score takes a dump because all their business debts had a personal guarantee.

    So, just a word of caution. If you do create a business entity and plan on using credit of some sort, make sure you actually establish a separate credit history for your business. The big problem is that this isn’t always easy, and there aren’t many banks or credit card companies willing to strictly lend a new business money without some sort of personal guarantee. So, just be careful, and know exactly what you and/or your business will be liable for so there are no surprises down the road.

    Jeremy´s last blog post..Don’t Forget – Today You Can Get Free Advice From Kiplinger and the NAPFA

    • Pat

      @Jeremy, Thank you for the wonderful advice and words of caution. You obviously have way more experience than me, and so I really appreciate any advice you may be able to offer myself and the readers of the SPI blog. Thanks again :)

      • http://genxfinance.com Jeremy

        @Pat, Oh, no problem. It’s just one area I’ve seen people take for granted and get burned, so wanted to throw it out there. Most of the time that stuff is in the fine print of a credit card agreement or something and people just assume that because it’s a “business” card, that it is completely separated from their personal credit. :)

        Jeremy´s last blog post..Five Things That a Generation X Financial Planner Did, That You Can Too

  • http://chasingthebull.info Dusty

    I agree with Jeremy with regards to business debt. Every bank that I have ever worked with requires a personal guarantee from the LLC members to repay the debt. I guess too many banks were burned in the past.

    Dusty´s last blog post..I Do Not Like Oprah but I Love Suzie Orman – Get Your Free Book Now

  • http://www.studenomics.com Studenomics

    Another great post, so I’m guessing this means no more going back to work for you? This is my goal as well to one day run my own successful LLC. At the moment I am working on completing my studies and everyone around me talks about where they want to work and all that kind of stuff. I feel weird because honestly I don’t want to work for any of these big firms, I want to work on my own. The internet is making being your own boss and work from home goals a lot easier.

    Studenomics´s last blog post..The Biggest Lies About Entrepreneurship

  • http://vikdulat.com Vik Dulat

    Great post! I will be starting my own company very shortly and I will also go the LLC route.

    Vik Dulat´s last blog post..Are you rich?

  • http://writeforehow.blogspot.com Julie @ Write for eHow

    Congratulations! You made an excellent decision. And I love the name!

    Julie @ Write for eHow´s last blog post..A Great Source of Article Ideas for eHow

  • http://lifestylesoftheorganized.com/ Sarah H.

    Thanks for helping me understand the difference between sole proprietor and LLC…it can be confusing. And of course congratulations to you…this must be very exciting!

    Sarah H.´s last blog post..Good News Regarding the Consumer Product Safety Improvement Act

  • http://www.ehow.com/members/01Bri-Guy-articles.html 01Bri-Guy

    Hey Pat –

    Nice post about companies and starting an LLC. I’m really interested to know if you had to transfer all of your sites/domains/affiliates into the name of this company and how you went about that. Also, what do you do with eHow in regards to your LLC?

    -Brian

  • http://radcaptures.com/blog Ryan

    Very kool and Informative. My goal is to also own my own company. Currently, I run a very small Photography Business on the side but everything is under the table. Eventually I want to make it into an official business.

    Ryan´s last blog post..Photo Adventure #1

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  • http://thepassivedad.com The Passive Dad

    Congratulations on starting your new business venture. I look forward to reading about your passive investments and success with your new company.

    The Passive Dad´s last blog post..2009 Bill Proposed For New Car Tax Deduction Up To $7,500

  • Rob

    I’m also looking to start my own corp as I now make more online than I do at my job and was wondering what are you planning to do about health insurance?

    thanks,
    Rob

  • http://www.personalfinancestartup.com/ Start-Up

    I really enjoyed the line: “I will NEVER earn less than I deserve.” I like the idea of owning your own company because the harder you work, the more you earn. At my current company if I work harder and longer, I might get noticed and receive a promotion or a bonus or a salary increase. If you own your own business there can be a direct correlation to how much you make and how much you work.

    Start-Up´s last blog post..Biggest Lesson Learned from this Bear Market

  • http://www.homesprosperity.blogspot.com Steve

    Congratulations on starting your business. I would be interested in hearing, at some point, you opinion on how an LLC compares to an S-Corp, advantages and disadvantages of the latter. My financial advisor had me go with an S-Corp recently, which is why I wondered.

    Steve´s last blog post..Links for 2009-01-11 [del.icio.us]

  • Sharingi V

    You made some good points there. I did a search on the topic and found most people will agree with your blog.

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  • Ari

    I approve.

  • http://www.plrinternetmarketing.com Warren

    Hey Pat, we don’t have LLC’s in Canada, though they sound like something I wish we did have.

    The part of the article I wanted to respond to was the “corny or fake” part.
    As a new reader (though someone who’s read about 40 of your articles so far) part of what I enjoy is the honesty, and transparency that comes through in your writing.
    You are definitely not someone who comes across as fake, and if I could emulate or learn something from you (aside from how to make a great passive income online) it would be how to find my own “voice”. I tend to be writing more “matter of fact” and am still working on getting more of “me” across!

  • http://www.goodlookingloser.com Chris

    Hey I like your ME statement on why you started your own business. It is what everyone is thinking but doesn’t have the fortitude to do or say. I like that you aren’t apologetic about it or political correct. 3 years later you are pretty damn successful. Thanks for keepin it real brotha
    Chris

  • http://www.amirrimer.com Amir Rimer

    Great post Pat!

    I really enjoyed reading the reasons why you have decided to start your own company.

    I think that many of us are the same, which means that we are aiming to make passive income online because we want to gain…. freedom. Freedom to do what we want, when we want to do it, and where we want to do it.