The BEST way to set up your business and MONEY 🏦
💸OMG the 💰checks started rolling in Faster than her banking app could refresh the page ❗️
👏🏾Jasmine couldn’t believe it😃 after she secured her 7th brand deal, her life changed forever. She would have financial freedom very soon🏝️.
🍹After going out for drinks to celebrate 🥂🍾 with her friends she decided it was time to start making some decisions about how to set up her business for success. She was a boss now.
💻 She did some research online and realized that right now she is what’s called a “Sole proprietor“. A sole proprietorship is just what it sounds like, it’s basically a just a non-registered, unincorporated business run solely by one individual proprietor with no distinction between the business and the owner. (In other words, just Jasmine lol). Many businesses like hers that do Influencer Marketing start off as sole proprietorships until their business opportunities become a lot more serious, and they start making some serious money too.
🙎🏾♀️ Sole proprietorships are pretty pretty simple because of the fact that you don’t really have to do anything, but the issue is that you’re opened up for risk if someone wants to take legal action against you for any reason whatsoever. If anything bad happened it would be on her, and she didn’t quite like the way that sounded because she wouldn’t want all her hard earned work to go down the drain especially since we live in a very litigious country (meaning anyone can sue you for any reason).😰
🛡️Jasmine wanted to feel more secure so she researched the security of an LLC (Limited Liability Corporation). An LLC would shield her personal finances from her business finances in case anything bad happened (God forbid). With her LLC she could also get business insurance which would give her peace of mind that she would have a team of Attorneys to help her in case anything ever went wrong. Now, this is the type of protection that she wanted🥹❗️
💼 Jasmine contacted LegalZoom and signed up for their services to get her LLC registered in her state, and she also spoke to an Accountant so she can understand a little bit more about bookkeeping and tax planning.
📉📊👩🏾💼⚖️👩🏽⚖️ Then she set up a meeting with some of their lawyers. The Accountants and Lawyers told her that she now had to set up a separate business banking account, and she could only make legitimate business purchases from this account. If she made any personal expenses through this account, it’s possible that she may lose her business protection and if (God forbid) someone wanted to sue her, that person could treat both her personal account AND her business account as if they are both her “personal account” since she’s buying personal items with both. This means that they could then go after ALL of her money 😱😳 Yikes❗️. Not a problem though. Jasmine knew she would be careful to make sure that she separated all of her finances. This would be easy because she’s a pretty organized person and likes keeping things proper and following all the rules. 👍🏾
😎She now knew how to both make money, and protect money.
💃🏾 Jasmine felt so confident about all these things that she had just learned that she did a victory dance in her room. She was even happier that this wasn’t her old room in her old apartment anymore, this was her new bedroom and her Penthouse Condo. 🏙️ 🎉🎊
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Setting up a business requires more than just the right idea; it needs a solid foundation. Starting off as a sole proprietor can be tempting due to its simplicity, but it exposes you to personal liability. This is where forming a Limited Liability Corporation (LLC) becomes crucial. An LLC separates your personal assets from your business debts, providing a layer of protection against lawsuit risks. Beyond legal protections, understanding tax implications is vital. LLCs allow for flexible tax arrangements, meaning you can declare profits and losses just like a sole proprietorship with the added benefit of personal asset protection. For entrepreneurs, especially in the influencer marketing space, maintaining organized financial records and separating personal and business expenses is paramount. It's advisable to open a dedicated business banking account to avoid blending your personal finances with your business income and expenses. Having clear boundaries not only preserves your LLC's liability protections but also simplifies bookkeeping and tax filing. Associating with professionals such as accountants and legal advisors can provide invaluable insights into effective tax planning and compliance, ensuring that your business remains above board and profitable. As you consider launching or restructuring your business, take the time to research and understand your options. The right setup will empower you to focus on growth while safeguarding your financial future.
I’ve actually always wondered the difference between sole proprietor vs. LLC business models. Your breakdown and the references you made helped me understand it a lot better!