Discover Why Sole Proprietorships Have the Wrong Business Structure to Grow.

Have you updated your goals going into the fall for this year? If the outcomes you’re looking forward to this year include making more money, gaining more clients, boosting your profits, cutting your taxes, or attracting lucrative joint venture partnerships…

the FIRST STEP is to STOP operating as a sole proprietorship!

This is the time to make the shift, not waiting another 5 months until January.

You want to escape the sole proprietorship trap for many important reasons:
1. Highest Audit Rate. Filing a Schedule C means you are 300% more likely to be audited by the IRS. Why? The IRS is a $300 BILLION tax collection gap each year, and a large percentage comes from small business owners who file a schedule C – not large corporations.

In the IRS’s eyes, small business owners are more likely to under-report income and exaggerate expenses. Now, I’m not saying that you’re making these big mistakes yourself, but the IRS will ASSUME that you are, simply because so many other sole proprietors do. That makes you an easy audit target.

2. Highest Taxes. Sole proprietorships pay the highest business tax rates. Not only will you pay the 15.3% employment taxes up to $137,500 in 2020, plus 2.9% for Medicare, you may also be required to pay a number of other state and federal taxes.

Of course, as a business, you may be able to offset some of that with business expenses or home office deductions (assuming they’re all properly set up and documented), but referring back to point #1, you’re setting yourself up for a potential audit.

3. Highest Liability. Here’s the bottom line for sole proprietorships – when you do business in or own name, or under a DBA, you have UNLIMITED PERSONAL LIABILITY for ANY legal issues that come up. Without the protection of a properly structured separate legal entity, you may lose most of your personal assets, including your home’s equity.

Maybe you’ve been operating as a sole proprietorship because you don’t have many assets to protect right now. If you hope to change that in the future and accumulate more wealth, it’s worth considering that you could be sued later for something you’re doing now. If someone gets a judgment against you, they could chase you for years, waiting until you DO have assets to go after.

Sole proprietorships offer no protection – even against frivolous lawsuits which run into hundreds of billions in the U.S. each year. Our research turned up a woman who filed over 700 lawsuits. Her “business” strategy was targeting people with unprotected money, and a person like that will go after anyone.

4. Fewer Funding Options. Operating as a sole proprietorship means you’re self-financing your business – most likely on your personal credit cards! That drives your revolving debt up and your personal credit score down – which can hurt your chances for business credit later on.

Even though it’s vital to keep business and personal credit separate, your personal credit history does affect your ability to qualify for certain kinds of cash funding options – including the amount of money you get and the interest rates you’ll pay.

The key is to STOP using personal credit to finance your business and form a separate legal entity ASAP.

This critical step paves the way for financial credibility – which means more and better opportunities to use other people’s money to grow.

5. A Lousy Marketing Message. If your first-year profit projection is under $50,000, a CPA or tax professional might advise you to “keep it simple” and start as a sole proprietor.

In rare individual cases, that might be good tax advice, but it doesn’t position you for long-term success – there are other essentials to consider if you want a complete business foundation. When potential customers or important suppliers or partners evaluate your business, what MARKETING MESSAGE does your sole proprietorship send?

Sharp business people may take it as a sign that your profit (and longevity) expectations are LOW and take their business elsewhere.

Sadly, they may never tell you the real reason why they chose not to do business with you – would you risk your own money, reputation, or relationships on a company that might not be around tomorrow? You may have already lost revenue and growth opportunities if you’ve been operating as a sole proprietorship.

If so, it’s time to position your company as a winner with the right foundation for success.

Do you get the picture? Operating as a sole proprietorship is NOT the way to go if you’re planning for success. As you set your direction for the remaining part of 2021, it’s time to make your BUSINESS OFFICIAL and step up to the big leagues with a COMPLETE FORMATION.

Here’s the PROBLEM – the internet is loaded with CHEAP ONLINE incorporating services that promise you everything you need for $99 (or less) to form a separate legal entity. Most are selling you a piece of paper with an EIN.

This is like buying a car and realizing after you’re zooming down the highway that BRAKES were OPTIONAL and not included in the purchase price.

Who in their right mind would sell you a car with NO freakin’ brakes?

Granted, that piece of paper and EIN may be enough to open a business checking account. Still, without a COMPLETE FOUNDATION starting with a COMPLETE FORMATION, you have absolutely ZERO PROTECTION!
Why is this so important?

Here’s what my friend, Attorney Lee Philips, said about businesses that rely on online articles of incorporation as their only form of legal protection:

“We slice through those in 15 minutes in court and go after the individual every time. That piece of paper provides NO protection!”

This is a direct quote from a legal expert who has been a counselor to the Supreme Court and tried many cases representing plaintiffs. His courtroom experience has shown him that most business owners have no clue what complete formation entails.

Over the last 23 years, my company, NCP, has helped thousands of entrepreneurs launch with confidence (just like you). Our COMPLETE FORMATION PROCESS ensured that they started with more than just a flimsy piece of paper that provided no protection.

Lee’s comments inspired me to take our training to the next level – we want every entrepreneur to be CLEAR beyond all doubt what it takes to form a complete and secure business foundation.

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