I have been selected as one of the newest additions to the Board of Directors for the Chattanooga Theatre Centre. I am looking forward to helping this organization grow over the next 3 years.
Photo from Chattanooga Theatre Centre
Deciding whether to incorporate a business or operate as a sole proprietor is a question often asked by business owners. Not all businesses need to incorporate, but it is a wise decision for many businesses. While many business owners address this issue during their startup phase, there are some mature business who decide to incorporate after operating as sole proprietors for years. Here are a few reasons why some business owners decide to incorporate.
If your business is not incorporated, you risk being personally liable for the debts and liabilities of your business. If a creditor gets a judgment against your business for any reason, the judgment is also against you personally and the creditor may seek to collect the judgment by placing a lien on your house or garnishing bank accounts (even jointly owned accounts or property).
Likewise, if your business is not incorporated, your personal creditors (including spouses in a divorce) may be able to access the bank accounts, real estate and other assets owned by your business. If you forget to pay your car insurance this month and injure someone in a vehicle accident, that person will be able to seek to recover what is owed to them through your business.
If your business may need to take out substantial loans, and you don’t want those loans to be reflected on your personal credit, your business will need to be incorporated. Otherwise, your ability to get funding personally or for your business may be hindered. Generally, financial experts say that it may take up to two years to start building business credit. Fortunately, I have found that there are a few lending agencies that are willing to work with business owners even before they reach their two-year anniversary.
Many investors are hesitant to invest in a business that is not incorporated because, ultimately, when the investors write their checks it’s made payable to “John Doe d/b/a Doe’s Construction” – which is ultimately John Doe, personally. They feel much better about making the check payable to an incorporated entity (e.g., Doe Construction LLC) because there are rules and regulations that govern what the business can and cannot do with business funds.
In addition to making the investors less hesitant to invest in your business, incorporated businesses are often perceived as more professional than sole proprietors.
One of the downfalls of incorporating your business is that you may be liable for additional taxes that sole proprietors are not liable for. Another downfall is that you may subject to additional regulations requiring more paperwork on your part. So, when deciding whether to incorporate, you should weigh the risks against the benefits to make the best decision for you and your business.
Over the past week, I have had the very unfortunate task of telling two different families that the wills left behind by their now deceased loved ones are not valid. When a will is deemed invalid, it is completely disregarded and the deceased person's assets are distributed as though a will never existed. Those wills from two unrelated families had two things in common: (1) they were prepared at the last minute when the loved one was on their death bed and (2) they were both retrieved off the internet. At my estate planning seminars, I am often asked to identify the issues with online wills and, in light of the last week's events, I will share a few of them with you now:
- When helping a family plan for their estate, a good attorney will provide you with the vast array of options you have to distribute your assets and provide care for your children and grandchildren. An online will does not have the ability to discuss those many options with you.
- Many online wills are "one-size-fits-all" and are not customized to your needs. You are unique and so are your needs. They should be treated as such.
- Each state's laws are different when it comes to the validity of a will and those laws change all the time. Online wills often fail to account for those differences and, by doing so, result in an invalid will.
- Getting a will for free (or at minimal cost) is not worth the risk that it may ultimately be found invalid. In one of the family's cases I mentioned above, the father gave a house to his daughter many years before his death, but the house remained in his name. The will the father created on the internet stated that he wanted his daughter to inherit the house. Instead, given that the will is invalid, the house will be split equally between the daughter and her two half-siblings. This may very well result in the house being sold and the daughter receiving 1/3 of the proceeds - instead of a house that is paid for as intended by her father. The online will was not worth it.
In planning your estate, please take the time to consult a licensed attorney.
Approximately 133 new laws will take effect in Tennessee on July 1st. These laws cover everything from lifting the restrictions on silencers for guns to making it illegal for protestors to block a public road. View a summary of the entire list here.
Thanks to Chatter Magazine and the Chattanooga Times Free Press for the honor of being selected as one of the Top 20 Under 40 Young Professionals in Chattanooga. This year, the magazine went with a superhero theme. I chose "The Eliminator" because my business is built on eliminating potential and actual problems for my clients. Read the full article here.