Few people appreciate it, but choosing the right entity structure for your business ranks up there with choosing the right partner for your business.
If you go into business with the wrong person, your efforts may be doomed from the start. The wrong person may too freely spend your money, may obligate the company to contracts it cannot fulfill, and may alienate coworkers before the first product or service is ever delivered. The wrong partner can leave you unprotected and waste all of your efforts and energy.
Likewise, choosing the wrong legal structure can also lead directly to failure. Starting out, you want to have as much asset and legal protection as possible. But by choosing a sole proprietorship or a general partnership, bad entities that offer no protection whatsoever, you stand to lose everything you have built in your business, along with all your personal assets as well. Plaintiffs and their attorneys love to see businesses operated as sole proprietorships and general partnerships, because they can reach both business and personal assets when they bring a claim. They have free rein to reach all of your assets.
Instead, use a good entity, such as a C-Corporation, S-Corporation, Limited Liability company, or Limited Partnership. These entities protect your personal assets from attack against the business. And like the right partner, the right entity will help you advance your protection and prospects in the future.
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Article from the book authored by Robert Kiyosaki: Before You Quit Your Job:10 Real-Life Lessons Every Entrepreneur Should Know About Building a Multimillion-Dollar Business