Do You Need A Business Entity

Starting a business and forming an entity are two different things.

Protection of Personal Assets

The benefit of operating through an entity is most debts and obligations of the business are limited to the assets inside of the business; in other words, personal assets of the owner(s) are not at risk. We have had numerous (potential) clients approach LicenseSure, having just opened their doors and anxious to "create a company," but they do not yet need the limited liability protection or – more practically speaking –the administrative paperwork, formation costs, additional tax requirements and ongoing compliance requirements of a formal business entity.

Be Insured

More important for design professionals than forming an entity is professional liability insurance. If a design professional is charged with negligence or misconduct, s/he may be personally liable for malpractice, regardless of whether s/he is practicing through an entity and the only appropriate protection against this is adequate insurance coverage.

Are We There Yet?

Solid reasons to form an entity include:

  1. The firm has more than one owner.
  2. The sole proprietor does not have the appropriate professional licensure to accomplish the existing work of the business.
  3. The business owns or operates its own office space or vehicles.
  4. Other than contracts pertaining to projects, the business is entering into other significant contracts.
  5. The business is hiring employees or contracting directly with subcontractors.

When the time is right to organize an entity, and then LicenseSure is here to help!

About The Author

Patti Harris spent 13 years as the Managing Partner of a New York City-based construction law firm; in addition to overseeing the business operations of the firm, she advised clients on office and business management issues.

Learn more about Patti on our About page.

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