50 Compelling Reasons Why Creators, Business Owners, and Influencers Should Do Business as Legal Entities

In the realm of online business, entrepreneurs and influencers are often pioneers, stepping into uncharted territory and forging new paths. They are risk-takers, dreamers, and doers.

But all too often, they miss out on one crucial step: forming a legal entity such as a corporation or limited liability company (LLC). This seemingly small oversight can have significant consequences in the long run.

If you think I’m exaggerating, put yourself in the shoes of these influencers who are being sued for a billion dollars relating to alleged comments and promotions of FTX to their audiences.

By establishing a legal entity, these trailblazers can harness the many benefits that come with it — benefits that are designed to protect their interests, grow their businesses, and ultimately propel their ventures to even greater heights.

The following is a list of my top 50 reasons why online business owners, entrepreneurs, and influencers should consider doing business as a legal entity, ordered from most important to least important:

1. Liability protection: A legal entity separates your personal assets from your business’s debts and liabilities. This shield protects your home, savings, and personal belongings from being seized in the event of a lawsuit or unpaid debts.
2. Tax benefits: Incorporating or forming an LLC can provide numerous tax advantages, such as deductions for business expenses and the ability to defer income. This can result in significant tax savings.
3. Credibility: Operating as a corporation or LLC lends credibility and professionalism to your business, making it more attractive to clients, vendors, and investors.
4. Perpetual existence: Legal entities continue to exist even if their owners or managers leave, retire, or pass away. This ensures your business’s continuity and longevity.
5. Easier access to capital: Legal entities can issue shares or take on debt more easily than sole proprietorships or partnerships, making it simpler to raise money for growth.
6. Transferability of ownership: Shares in a corporation or membership interests in an LLC can be sold or transferred, making it simpler to bring in new investors or transfer ownership.
7. Centralized management: A legal entity centralizes decision-making authority, streamlining operations and facilitating management.
8. Attracting talent: Legal entities can issue stock options and other equity incentives to attract and retain top talent.
9. Privacy protection: In some jurisdictions, legal entities can be structured to provide a degree of privacy and anonymity for owners.
10. Business credit: Legal entities can build business credit separate from personal credit, enabling access to better loan terms and lower interest rates.
11. Asset protection strategies: Corporations and LLCs allow for advanced asset protection techniques, such as holding assets in separate entities to minimize risk exposure.
12. Intellectual property protection: Legal entities can own and manage intellectual property, ensuring the proper handling and protection of valuable assets.
13. Flexibility in profit sharing: Legal entities offer more flexibility in structuring profit sharing among owners, allowing for customized arrangements that align with business objectives.
14. Estate planning: Legal entities can play a crucial role in estate planning, enabling the transfer of business assets to beneficiaries without triggering estate taxes.
15. Better dispute resolution: Disputes among owners can be resolved more effectively through the legal framework of a corporation or LLC.
16. Compliance with regulations: Operating as a legal entity can help ensure compliance with applicable laws and regulations, reducing the risk of penalties or sanctions.
17. Lower audit risk: Legal entities generally face a lower risk of being audited by tax authorities compared to sole proprietorships.
18. Clearer business structure: Legal entities provide a clearer business structure, making it easier to manage roles and responsibilities.
19. Enhanced marketability: Legal entities can be more easily marketed and sold, as their assets and liabilities are clearly defined.
20. Streamlined operations: Legal entities can streamline operations by centralizing authority and decision-making, reducing inefficiencies.
21. Increased valuation: Legal entities often command higher valuations due to their inherent advantages, such as liability protection and tax benefits.
22. Easier franchising: Legal entities simplify the process of franchising a business, providing a clear structure for franchisees to follow.
23. Access to government contracts: Some government contracts and grants are reserved for businesses operating as legal entities, opening up additional opportunities for growth.
24. Distinct legal identity: A legal entity has its own legal identity, separate from its owners, providing clarity in legal matters.
25. Simplified exit strategy: Legal entities make it easier to plan and execute an exit strategy, whether through a sale, merger, or other means.
26. Simplified joint ventures: Forming joint ventures or partnerships is more straightforward with a legal entity, as the structure and responsibilities are clearly defined.
27. Enhanced scalability: Legal entities can help businesses scale more efficiently by facilitating access to capital, talent, and other resources.
28. Reduced personal liability in contracts: Legal entities can enter into contracts on their own behalf, shielding owners from personal liability.
29. Greater negotiation power: Legal entities can offer a stronger negotiating position when dealing with vendors, suppliers, and other stakeholders.
30. Easier estate administration: Legal entities can simplify estate administration by clearly defining the ownership and value of business assets.
31. More efficient tax reporting: Legal entities often have more streamlined tax reporting requirements compared to sole proprietorships.
32. Streamlined recordkeeping: Legal entities require formal recordkeeping, promoting better organization and business management.
33. Enhanced brand protection: Legal entities can register and protect their brand more effectively, safeguarding valuable intellectual property.
34. Simplified mergers and acquisitions: Legal entities facilitate smoother mergers and acquisitions, as assets and liabilities are clearly defined.
35. Easier international expansion: Legal entities can simplify the process of expanding a business internationally, providing a clear structure for foreign operations.
36. Improved risk management: Legal entities can help business owners manage risk more effectively by segregating assets and liabilities.
37. Enhanced borrowing capacity: Legal entities often have greater borrowing capacity due to their ability to access business credit.
38. Greater financial flexibility: Legal entities provide more options for structuring finances, such as issuing shares or taking on debt.
39. Increased diversification: Legal entities allow business owners to diversify their holdings, reducing the concentration of risk.
40. Clear succession planning: Legal entities provide a clear framework for succession planning, ensuring business continuity.
41. Simplified management of multiple businesses: Legal entities make it easier to manage multiple businesses under a single structure.
42. Enhanced investor appeal: Legal entities can be more attractive to investors, as they offer a clear structure and inherent benefits.
43. Improved governance: Legal entities promote better governance through formalized decision-making processes and recordkeeping.
44. Greater stability: Legal entities can provide a more stable business environment due to their perpetual existence and centralized management.
45. Easier dispute resolution with third parties: Legal entities can help resolve disputes with third parties more efficiently by providing a clear legal framework.
46. Enhanced flexibility in raising capital: Legal entities offer more options for raising capital, such as issuing shares or taking on debt.
47. Better access to professional services: Legal entities can attract higher-quality professional services due to their credibility and professionalism.
48. Simplified tax planning: Legal entities can provide more opportunities for tax planning, such as income deferral and deductions.
49. Easier collaboration with other businesses: Legal entities can facilitate collaboration with other businesses by providing a clear structure for joint ventures and partnerships.
50. Access to specialized legal protections: Legal entities can offer access to specialized legal protections and benefits, such as those available to benefit corporations or professional corporations.

Conclusion

The digital age has brought a plethora of opportunities for online business owners, entrepreneurs, and influencers to make their mark. But to truly harness the potential of this brave new world, it is essential to consider the advantages of operating as a legal entity. From liability protection to tax benefits, credibility to perpetual existence, and access to capital to streamlined operations, the benefits are numerous and far-reaching.

By taking the necessary steps to establish a legal entity, these trailblazers can not only safeguard their personal interests but also create a solid foundation for long-term growth and success. After all, the journey of a thousand miles begins with a single step — and that step is forming a corporation or limited liability company.

Have fun, stay safe, and make each day your masterpiece!

Mitch Jackson

2013 California Litigation Lawyer of the Year

https://linkedin.com/in/mitchjackson

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