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Archives for July 2017


Food for thought for the would-be entrepreneur (part 3 in a series)

I can feel you getting impatient!  All you really want to know is, How do you do it?

To form any business entity, you have choices.  You can meet with an attorney, or you can do it with one of those online companies, or you can call a number from a radio ad, or you can do it online, all by yourself.  Let’s look at these for a minute.


I know all you do-it-yourselfers like the idea of skipping straight to the federal and/or state websites where the only cost is the state filing fee, but, beware!  You sure aren’t getting any expert advice at all if you choose this method.  Too many times, I’ve seen the person actually only do half the filing.  NJ for instance, is a 2-part process, and the IRS is completely separate.  Don’t rush into this!

Radio/Online Solution

If you follow the advice of the radio/online ad, it is highly likely you will get no advice.  None.  Not legal advice, not tax advice, nothing.  Think about it:  their business model is just luring you in to spend money on a standard product which may or may not be suitable for your needs.  Additionally, NJ, like other states, has peculiarities which are not taken into consideration by the easy ad options.  From what I’ve seen, pretty much everyone who used this method got a shiny binder full of meaningless papers.  It may be cheaper than the lawyer, but it’s hardly better than DIY.


It is hoped that an attorney will give you solid, dependable, legal advice, and basically explain all the different choices, and the ramifications of each, as it pertains to the state where you live and work.

Unfortunately, you have to make sure you have an appropriate attorney!  A wills-and-estates attorney isn’t the best choice for forming your business.  Neither is a personal injury attorney.  Or a divorce attorney.  Or a real estate attorney.  And maybe not even your well-meaning brother-in-law.

You need to find someone who specializes in business matters or you won’t get very good advice.  You are going to pay more to the attorney than to anyone else, so you should make sure you get one that is worthy.  Then, ask questions!  You’re paying for it:  get your money’s worth!


Sadly, I’ve seen all of these methods fail.  DIY folks can end up being registered for the wrong state tax forms.  The online/radio solution ignores a state basic, or provides a feature that is useless in that state.  Sure, Mr. DIY might not complete all the steps…but I’ve seen the radio/online solution and the attorney fail in this same way.  One fellow paid $800 to an attorney to become a sole member LLC…but he did not even get a federal ID number.  Some attorneys just log into the online solution and read the screens to you.  Other attorneys make a big deal out of doing all the paperwork longhand, mailing it in, then making you come back when it’s all been completed; I think this is just a ruse to let you think it is more complicated than it really is.  A really crazy one was a fellow whose trusted banker insisted he could do it for him for free:  he was trying to establish a bagel deli, but he ended up registered as a farm with seasonal labor.

In reality, for most small entities, the entire process can be done online in about an hour…if you know what you are doing.

Please be careful.  Please do your due diligence!

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Food for thought for the would-be entrepreneur (part 2 in a series)

Why do entrepreneurs want to get incorporated in the first place?

Many entrepreneurs think incorporation is the first step to a successful business.  After all, it worked for (insert name of any giant corporation,) didn’t it?

More often, people want to incorporate (or become LLC’s) because they have the idea that incorporating provides some amount of protection against personal liability.

They heard about it on the radio, or maybe they’ve pieced together some overheard conversations and movie dialogue.  Well, hold your horses!  There are various ways to go into business in these United States, and incorporation is only one of them.  Each choice carries different levels of responsibility … and different types of taxation.  (We’ll get to that.)

First, the best way to keep yourself out of the courtroom is to keep your business practices on the up and up.  Even if you are properly incorporated (or properly any other type of business,) improper business practices can nonetheless open you up to the terrifying prospect of personal liability.  Sorry to be the one to tell you this, but you have to follow the rules.  (More on this later.)

Second, if you are seriously concerned about protection from lawsuits, then it’s a good idea to be properly insured.  Regardless of your form of business or your industry, in today’s litigious society, if someone wants to sue you, they will find a way.  (Yeah, there I go again with the doom and gloom.)

I can’t stress the need for plenty of appropriate insurance.  Some forms of insurance are required by industry, or by activity.  For instance, if you have a professional license, you need professional liability insurance.  If you drive a vehicle, you need an auto policy.  If you have employees, here in NJ, you need a worker’s compensation policy.  So before you decide to incorporate, go talk to an insurance agent to find out what you might need.  It could make a difference in what you decide.

In the next few articles, I’ll address the how-to, and then discuss the options ahead of you – incorporation, partnership, sub S corporation, LLC, and of course, sole proprietorship.

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