Do you want to be an entrepreneur, or do you want to live the lifestyle entrepreneurs are perceived to live?
Being your own boss. Working your own hours. Taking business calls on a cruise liner.
Why can’t that lifestyle be possible?
Well, because too many aspiring business owners put the cart ahead of the horse. They go in full steam ahead, expecting to run before they walk. The idea is great, but the execution is questionable.
Then the inevitable challenges of owning a business inevitably rear their ugly head. Your web hosting provider experienced an outage. Your night shift manager unexpectedly quit. A small construction project at your business’ intersection has gone on for weeks, and traffic seems to think there is no access to your storefront.
The flexibility of being your own boss has suddenly become a 24/7 cloud that dominates every aspect of your life.
At The Startup Magazine, passion lies in connecting small business owners with the insights and thought leadership to help focus their entrepreneurial vision. Keep reading as we explore some simple ways that business owners can build a safety net without sacrificing the work-life flexibility afforded by “being your own boss.”
Choose the Correct Business Structure
When it comes to business structure, it has become colloquial wisdom within entrepreneurship that forming an LLC is the way to go. By creating a separate legal entity for business interests, any financial or legal troubles encountered by the company cannot be carried over into your personal life.
To be sure, an LLC offers more personal asset protection than a sole proprietorship. However, it does have some drawbacks that are not ideal for some entrepreneurs. These include:
- Difficult to attract investors
- Complexity in transferring the LLC to a different party
- “Corporate veil” far from ironclad in single-person LLCs
For small business owners looking for a greater degree of flexibility within their business structure, it is worthwhile to consider a limited partnership.
You may be wondering: what is a limited partnership?
A limited partnership (LP) is a type of business structure in which ownership stakes are distributed between a general partner and any number of “limited” partners. The general partner assumes all of the risk in business activities. Because they are ultimately responsible for all business decisions, they are sometimes referred to as the “managing general partner.”
Limited partners, on the other hand, contribute financially to the business but do not assume any risk beyond their monetary investment. Since they are not involved in business operations, they are sometimes called “silent partners.”
Limited partnerships are great for family businesses. They make it easy for relatives to contribute to a loved one’s cause while keeping risk and responsibility centralized on the general partner. LPs can also be a powerful tool in estate planning, as contributions to the business can be used to lower taxable estates. Finally, because LPs have been around much longer and are far more standardized than LLCs, court rulings are more regular and predictable should legal difficulties arise.
Have Adequate Cash Reserves
“Tuck away some money for a rainy day.” This age-old advice seems to be long-forgotten in an era when many Americans live paycheck to paycheck.
Nonetheless, while people seem to somehow “make it work” in their daily lives, it is short-sighted to expect “living by the skin of your teeth” to be sustainable in business operations.
Ever wonder why the list of the world’s wealthiest people is littered with those coming from privileged backgrounds? Sure, private schools and elite networks play a major role. However, the benefit (fair or not) of being able to call on mom and dad to keep the ship afloat during those turbulent early years cannot be understated.
As such, it is crucial to have adequate cash reserves. Aim to have a nest egg of at least 6 months’ operating expenses in place before opening your doors. It is also prudent to have emergency lines of credit ready to tap should you experience a prolonged spell of difficulty. “Temporary” shutdowns due to cash flow problems are rarely just temporary for small businesses, so be well-prepared to avoid such a scenario.
Invest in the Right People
“You’re only as good as the people you associate with.”
Another pithy maxim apt for the business world.
Cheap as it may feel in the era of AI and automation, having the right team in place is crucial for small business owners who don’t love the idea of being married to their business. How can a restaurant owner enjoy a day off if they constantly have to worry whether or not the store will get opened on time? How can a 3PL entrepreneur recover if employees misappropriate client data?
Therefore, don’t go cheap when it comes to building a team. Compensate fairly. Train extensively. Go above and beyond to show your appreciation. It’s not the best way; it’s the only way.
Enjoy the Freedom of an Entrepreneurial Lifestyle with Fewer Risks
Once it gets off the ground, the work-life flexibility of being a business owner will make you never want to go back to a 9 to 5. But it takes some strategic planning and legwork to get there. By structuring your business correctly, ensuring adequate cash reserves before opening your doors, and investing extra in the right people, you can build an elite risk mitigation structure for your company that does not infringe upon your lifestyle.
Author Bio:
John Skabelund is a nationally recognized attorney at Ultimate Asset Protection with extensive experience in asset protection across the United States. His clients appreciate his ability to simplify complex topics, earning him a reputation for having the heart of a teacher.
