All right, so what's the best type of entity you should choose, I mean what kind of type
identity gives you the best chance of getting the most financing? Well that's
exactly what we're going to decode in this training we're going to take a look at LLC's
we're going to look at sole proprietorship we're going to look at everything you need to know
what to avoid and how structure your business the right way right from the beginning to be able to
get maximum funding from lenders and from credit issuers, we got a lot to cover, so let's dive in.
So let's start with sole proprietors, okay do you want to be a sole proprietorship or do you
not? Well first thing you need to know is that most people in the finance sector mostly authorities
Inc., Entrepreneur, SBA score even SBA don't even really look at a sole proprietorship as a real
business, as a matter of fact, SBA describes this as you experimenting with an idea instead of having
a real business, so even if you have an idea to experiment with well then a sole proprietorship
isn't a bad way to start, some states like California might require six, seven, eight
hundred dollars or more to set up a corporation, but a significant discount if you're going getting
started as a sole proprietorship, so if you're in a state where it's affordable to get started with
another entity type well then you definitely want to do, so but if for affordability reasons mostly
you want to be a sole proprietorship that makes sense then you might want to get started that way,
but you really want to try to avoid being a sole proprietor right from the beginning if you can and
do so at all cost, and here's why. Because like I said lenders, credit issuers, authorities like score
SBA don't even really see sole proprietors as real entity types, and the other problem is you have all
kinds of liability you're taking on don't get me wrong I'm not an accountant I'm not an attorney
and this isn't legal or accounting advice, but the reality is a sole proprietor when you are that
entity you are the business. Which means if the business ever gets sued well you get sued because
you are the business, that oftentimes also means that the profit loss of the actual business gets
carried over to your personal taxes there's just a lot of things to keep in mind as a sole proprietor
oftentimes without a DBA the name of the business is your name even, so there's a lot of
reasons you want to avoid being a sole proprietor, but again for the most part you want to avoid it at
all cost because you want to have as much credibility with lenders and credit issuers, so they
want to give you the most amount of money at the absolute best financing terms, so let's talk about
LLC's, do LLC's make sense? Well yeah they can help you in a lot of different ways the first thing to
know is an LLC isn't even an official entity designation with the IRS, as a matter of fact, an LLC
can kind of be layered on top of other entity types, so you could actually be a sole proprietorship and
have an LLC layered over that and give yourself a lot of credibility because now you're an actual LLC,
or you can set yourself up in some states as an LLC, or use that LLC as an overlap for
even being a corporation, but an LLC is a great way to go because a Limited Liability Company
which is what an LLC does, just what it sounds like. It limits your liability now again I'm
not an accountant I'm not an attorney and this isn't legal or accounting advice, but an LLC will
help make it easier for you to not be personally liable for a lot of things in your business
it creates some kind of limited liability with you and separates you from the business liability wise,
and it makes it way easier to get credit financing because having an LLC makes you look like a
significantly better or more legitimate business than you'll ever be using a sole proprietorship.
So let's say you're a sole proprietor now when do you change, well the answer is as soon as possible.
Like I said, a lot of the reasons' people choose to be a sole proprietorship is just because
in states where it's too expensive to choose another entity type, whenever you can you want
to switch over to at least an LLC if not another entity like a corporation, and this can easily be
done directly with your Secretary of State by just doing your upgrade of your records there
if you're confused or don't know how to do it then you can contact your Secretary of State or
you can even work with an accounting professional in your state that can help you do it as well, so
what's the cost of changing your entity type?Will it affect your EIN the length of time that your
business has been open will it affect your ability to build business credit. These are questions I get
all the time, and the reality is it's very simple like I said, in a lot of states you can easily go
to your Secretary of State and just make a simple change to the actual entity type, it doesn't reset
the start date of your business so it doesn't adversely affect your EIN number doesn't adversely
affect the length of time your business has been open your business credit accounts
any of those things, so as soon as you can change to an LLC you want to because there really aren't
any adverse consequences and again it goes a long way to helping you set up a fundable
foundation where lenders and credit insurers want to give you money. If you want to learn more about
doing this the right way and 125 other aspects of fundability well make sure you check the link in our
bio because there you'll find resources on building a fundable foundation, and keep in mind entity type
is only one part of the equation. You also look at the way you structure your address, your phone
number you have licensing merchant accounts bank accounts there's over 125 fundability factors
that we found, and if you want to get started with building a fundable foundation the right way when
lenders and creditors want to give you the most money at the best terms, then check out the link in
our bio right now. Also make sure you like and subscribe and keep your eye out for our next training
where we talk about more cool ways to get the money you need to start and grow your business.