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.
- In a sense, a business is seemed to be more legitimate if it is not run as a sole proprietorship.
- 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.
- It's much more difficult to hire employees if the business requires them.
- As soon as the owner decides not to have the business anymore (or the owner dies), the business ceases to exist.
- 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.
- 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:
- A sole proprietorship does not have to pay corporate taxes.
- The person who owns the business will simply put their profits into their own personal income taxes, which makes accounting much easier.
- 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:
- Of course, the limited liability. The owners cannot be held personally liable for company debts.
- 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.
- 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.
- Distribution of money to employees, including the owner, is as simple as an online payment or writing a check.
- It's much easier to raise capital and create accounts at bank institutions.
- It's much easier to sell the business or a part of it.
- There's far less paperwork involved when compared to a corporation.
- 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:
- The LLC business entity is fairly new, and therefore some states do not treat LLCs in the same manner as corporations.
- 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.
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.