For simplicity, I am using the term “Organize” to include corporations and LLCs. So keep listening – and read the blog — regardless of the type of entity you may create. Unless you want to create a partnership. That’s so 1980s . . .

You have a business. You’re generating revenue. You’re paying employees. Yeah, you have a business, but you haven’t taken the next-step of creating an LLC or corporation. Well, when is the best time to do so? Here are 5 reasons to do so quickly!

It eliminates your personal liability for company debts. This is may be the biggest reason.

You don’t wanna to be liable for your employees’ conduct while they’re working.

You don’t wanna create a common-law partnership if you get a partner, which makes you personally liable for company debts.

Create an LLC or corporation and avoid this brain damage.

It presents a professional image – get business cards! Looks pretty nice, eh? Your corporation or LLC makes you look more credible to the rest of the world.

There are tax advantages, but – a little CYA here – double-check with your accountant.

To obtain financing. A bank would much rather make a loan to an established entity. Especially one with nice business cards!

To establish the rights of founders. If some owners are not gonna be treated as equals, you can prevent future misunderstandings by putting their financial and management rights in writing.

Look, the only downsides to incorporating early are the small costs of (i) creating the entity, (iii) paying annual fees, and (iii) meeting other compliance requirements. But the benefits far outweigh the costs.

The bottom line: there are many incentives for creating an entity – a corporation or an LLC as soon as you can. I have taught this and practiced this for many years. If you have questions, feel free to call or email me, your Harvard Lawyer, Don Petersen. Email me at [email protected]. Or call me at (616) 389-4960.