Sunday, February 25, 2018

What Legal Structure To Choose For Your Business

How should I legally structure my business?

I get this question almost every time when coaching a start-up. Needless to say, it is an important question and one which requires some thought about how you want to manage your new business.

There are a number of business structures each with pros and cons and centering, mainly, around the issue of liability with the secondary considerations regarding financial and tax reporting.  The types of business structures and their definitions are:
  1. Sole Proprietorship 
  2. General Partnership
  3. Limited Partnership
  4. Limited Liability Partnership
  5. Limited Liability Company (LLC)
  6. Sub-chapter S Corporation 
  7. C Corporation
- A Sole Proprietorship consists of one individual or married couple. The most simple to form, the SP is the most common form of business structure. It is easy to manage and not burdened with legal controls or tax requirements and reporting.

Their principal problem is that the owners are personally liable for all debts and legal actions held against the business.

- A General Partnership consists of two or more individuals who agree, in a written contract, to manage the business and share in its profits or losses. Like a Sole Proprietorship, under a General Partnership, each partner is personally and legally liable for debts and legal actions against the business.

- A Limited Partnership (LP) is comprised of two or more general partners and one or more limited partners.  The general partners manage the business and share fully in all profits and losses. The limited partners share in the profits but are limited in the losses to the extent of their investment and are normally not involved with the management of the company.

- A Limited Liability Partnership (LLP) is like a General Partnership but the partners do not have personal liability for the negligence of the other partners. This structure is favored by doctors, lawyers, CPAs, and other professional businesses.

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- A Limited Liability Company (LLC) is a common structure used by one or more individuals (or entities) through a written agreement. This agreement details the business's provisions for the management and distribution of profits and losses. LLCs can engage in any type of business except banking and insurance and the owners are limited as to their liability.

- Corporations - The law views a corporation as an entity separate from its owners. It has its own legal rights, independent of its owners, which are shareholders in the organization. They are more complex and costly to establish and require extensive financial and tax reporting vs. other structures.
S- Corporations, provides for very limited liability on the owners who are shareholders.  These shareholders share in the profits and losses based upon the number of shares held by each and are reported on each shareholders personal tax return each year. The S-Corporation provides for more liability protection than an LLC or Partnership.

C - Corporations are large organizations whose ownership shares are normally publicly traded on an exchange. Owned by shareholders C Corporations are taxed as separate entities and can retain earnings which an S - Corporation can not.

Most start-ups structure as LLCs or Sub S Corps. which provide for limited liability on the part of the owners - with the Sub S providing an additional level of liability protection.

Jim Lavorato

Wednesday, February 21, 2018

Disruptive Technology & The Brand Marketer

Disruption use to be a dirty word. Now, disruption is relevant, creative, and forward-thinking.

Amazon entering the super-market and shortly the drug prescription business. Uber in the taxi business, Airbnb in the rental property business, Netflix in content distribution, crypto-currencies and so on - disruptive technology is upending all aspects of life.

This is a challenge for brand marketers as unlike traditional marketers, who earned their keep by stroking  our anxieties, the new marketing mantra is to fashion real-world solutions that deliver value propositions that measure-up to our hopes and dreams.

New technologies require adjustments and compromises; however, there is no doubting that the advance of technology has directly caused the life of the average person to be richer, freer, healthier, and happier.
Fund-House Ventures - The Source For Innovative Thought

Apple, Amazon, Google, Intel, and others are tech powerhouses because we like what they sell. They have won are loyalty. There is plenty of evidence of  technology has-beens which are grim reminders that success is only as secure as the ability to stay nimble and responsive to evolving consumer preferences. Competition is very fierce. Anything we don't like about one product will be exploited quickly by another.

Many things affect what consumers need and want. Brand marketers must constantly respond and bring new solutions to the marketplace. Demand is shifting as growing numbers of consumers look for a better balance of time-on and time-off.

Social engagement is on the increase as there is growing desire to make personal connections. Referred  to as the Kinship Economy this is a big and growing opportunity for brand marketers to build on brand-to-consumer interaction and be disruptive.

Keep in touch,

Jim Lavorato