By: Jerry Chautin, SCORE volunteer, business columnist
SCOREing small-business success

Workshop: You Built It, Now Legally Protect It
When: May 5, 9:30 a.m. to 12:30 p.m.
Where: SCORE Atlanta, 233 Peachtree Street, NE, Ste. 1900
Details: Online at tinyurl.com/cydufq or call, 404 331 0121

“You should not go into business without establishing your business as some form of corporate entity,” Heather C. Wright advises attendees at her workshops. “Otherwise, you are asking for trouble.”

Wright founded The Wright Firm, LLC, a law firm that specializes in business law and litigation for small businesses. She will teach the workshop called “You Built It, Now Legally Protect It,” on May 5. SCORE, “Counselors to America’s Small Business,” is hosting it.

When I launched my commercial mortgage and real estate business, I formed an S corporation for personal liability protection and to avoid double taxation. It afforded me the ability to pass through profits as dividends without paying corporate taxes. C corporations pay corporate income taxes.

The limited liability company form of business ownership also offers personal liability protection and tax-free income distributions to its non-management members. Furthermore, it can be easier to create and cost less than incorporating. But there are important differences.

Here are a few differences:

■ Only salaries are subject to the 15.3 percent self-employment tax for S corporations. But LLC members must pay it on salary and profit if they actively participate in management. Self-employment tax pays for Social Security and Medicare.

■ S corporations have perpetual lives. LLCs dissolve when the last member dies, quits or retires.

■ S corporations are limited to 100 stockholders. LLCs are allowed an unlimited number of members.

■ S corporations require stockholders to be American citizens or permanent residents. LLCs may admit foreigners.

■ If you’re doing business in more than one state, tax treatment and other rules for LLCs may differ in each state — but not for S corporations.

■ LLCs may not be suitable if you plan to go public in the future. Corporations can sell stock.

Wright recommends that you get advice from your accountant to see which is more suitable for your tax situation.

Even though I incorporated my business, I also loaded up on personal liability, health and disability insurance. It provided an important layer of protection for my family and me. “In this day and age, you should truly strive to be over-insured,” Wright says. “I suggest that most of my clients meet with reputable independent agents to discuss coverage, because an independent agent works for you, the consumer, rather than the insurance company.”

Be sure to keep your personal household expenses separate from your business transactions. Otherwise the Internal Revenue Service may disallow your tax deductions. Additionally, not keeping your business separate makes it easier for creditors to “pierce the corporate veil” and go after your personal assets.

“The easiest way for someone to go after your personal assets; that means your bank accounts and home, based upon some business wrong, is to demonstrate that you are not really a corporation, because you have commingled (or) mixed up your business and personal assets,” Wright says. “You should have separate bank accounts, separate credit cards, separate files, and separate bookkeeping.”

In order to understand what you must do to protect your business and your family, and get your questions answered, do not miss this essential workshop.

About SCORE:
Since 1964, SCORE “Counselors to America’s Small Business” has helped more than 8 million aspiring entrepreneurs and small business owners through counseling and business workshops. It is a nonprofit resource partner with the U.S. Small Business Administration. More than 11,200 volunteer business counselors in 370 chapters serve their communities through entrepreneur education dedicated to the formation, growth and success of small businesses. The Atlanta chapter has 100 volunteers in conveniently located branch offices.

Note to media: Photos of the SCORE counselors quoted and interviews are available upon request. For interviews with SCORE business counselors or SCORE small-business clients, contact SCORE’s chairman, Jeff Mesquita: e-mail, scoremarketing@joimail.com, cell: (770) 713-1702. You may use this article in part or in its entirety and distribute copies with credit to SCORE Atlanta www.scoreatlanta.org. The columnist’s CV is online at: tenonline.org/sref/jc1bio.html