Business Planning: How to Get Started, DIY or attorney?
I got this question on my Facebook page, and I’m not entirely clear about whether the question was meant to be about business planning or estate planning, but it’s a great question either way, so I’m going to make this question a two-for. I’m going to answer this as it relates to business planning in the first video, and in the next video, I’ll answer it as it relates to estate planning.
So, the question is: How do I get started? What can I do myself and what do I need a professional for?
Let’s discuss what the point of business planning is, and how you can help yourself, versus when you should seek help from a lawyer.
- The first general point is organization and legal compliance. You want to make sure your business is legit, and that you’re not breaking any laws. This is a place where you can do a lot of self-help. Here in Oregon, there are a ton of resources provided to the public about how to organize your business and how to comply with laws. Look on the Oregon Secretary of State’s website as well as the Oregon State Bar website and look to groups like MercyCorps for guidance on legal compliance and business organization practices.
- The second general point of business planning is tax savings. In the beginning of starting your business, you may not be making a lot of money yet, and so tax savings may not be a huge discussion at that point. But when you are getting to a point where you are bringing in more than what a “reasonable salary” would be in your field, it’s time to have that conversation with your tax professional and an attorney about how you can structure your business to save on taxes. In the meantime, you can do some self-education on the difference between different types of business entities, particularly LLCs that are taxed as pass-through entities and LLCs that are taxed as S-Corps.
- The third general point of business planning is to protect you from creditors. If your business must shut down due to your illness or injury, personal family situation, or just because most businesses aren’t successful beyond five years, you don’t want to be on the hook personally for business debts. Oftentimes, you can do this successfully simply by filing with the Secretary of State in Oregon as an LLC. Usually with small debts, companies will not bother trying to collect against you if your LLC is not active. But you can face trouble with larger debts, where creditors are more motivated to see if they are able to come after you personally for debts owed. If you’re going to be incurring larger debts, it’s a good idea to work with an attorney who can make sure that your LLC is set up the right way so that creditors can’t come after your personal assets.
- The last major reason for business planning is to protect you from expensive lawsuits. Everyone with a brick-and-mortar business or who holds in-person events faces the possibility of an expensive lawsuit. So do many businesses who have employees or who sell goods or services. The self-help you can do here is to get a really good insurance policy. But you also need to work with a business planning lawyer to really firm up our business foundation to protect you personally if your business is sued. Just imagine the scenario where you are sued by a customer who was injured and sustained $10M of damages, and your insurance policy only covers $5M. That plaintiff will be motivated to try to sue you personally if they can, and if you don’t want to lose everything you own, you should invest in a really good legal plan to protect yourself.
So, to recap, there are a lot of different reasons for business planning: Organization and legal compliance, tax savings, protection from creditors, and protection from lawsuits. There are many preliminary steps you can take, like filing as an LLC with the state, getting a solid insurance policy, and self-help education about tax savings and liability protection. But at some point, you’ll need to meet with a lawyer who can really solidify your business foundation, and the sooner the better. Once you run into a legal issue, it’s usually too late to go back and fix any lack of planning.
For more info on this, go to my website and download the free report, “Business Owners: 5 Reasons Why You’re Screwed If You’re Sued.”
I also offer Business Planning Audits, in which I would go over your family, asset, and business info based on a worksheet you’d fill out ahead of time, and we’d look at where you’re at risk and how you can plan to avoid anything you don’t like. Give me a call or email if you want to set that up.
To your family's health & prosperity.
P.S. Want to get started on the most important planning you'll ever do for your family and business? Give our office a call at (503) 235-5150 or email Candice@CandiceAistonLaw.com to get started. You'll be glad you did.
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Candice N. Aiston is an Legal Planning Attorney for Estates + Businesses in the Portland, Oregon area. She helps people to prepare for a lifetime of security, prosperity, and guidance. If you would like to receive her free reports, please visit http://aistonlaw.com/. Follow her Facebook page for daily planning tips: https://www.facebook.com/aistonlaw/.