Wednesday, February 3, 2016

DIY Rant - Your Money or Your Life

Sorry but I have to rant - but my rant is at least related to my last post: Why Structuring Your Business Relationship is Important.

The "Do It Yourself" approach to forming a business entity (and, to some degree, in analyzing Franchise Disclosure Documents) is all the rage these days. I just file something online with the Secretary of State or State Corporation Commission and I am done. Easy, no legal fees involved, and I just saved a "ton of money."

So here is the rant: in the last five years, I have seen more incomplete, screwed-up, improperly formed entities than in my previous 35 years-plus combined. Why? Folks think they can DIY-it! And, this is a prevalent practice among franchise-operators trying to save a buck. Ladies and Gentlemen, this is not a home improvement project you can pull off the shelf at The Home Depot.

Why do you want an entity to begin with? To protect your personal assets and, in some instances, to enjoy certain tax benefits. If you screw-up the formation - by not creating the proper internal governing documents, not issuing share or membership certificates, not establishing the correct accounting procedures and the like - you may have just placed your personal assets at risk. In other words, your money or your life!

So do yourself a favor. That "ton of money" you think you saved could be peanuts if your personal liability is at risk for a major business reversal, personal injury or other business liability. If you are just forming an entity get yourself a good business lawyer; and do it right; if you formed an entity without a lawyer, get yourself a review by a good business lawyer. Gaining protection from a properly formed entity is your best "life" insurance policy that has a one-time premium payment! Get one.

See you at The Home Depot.

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