Size Matters by Jerole Nelson

Does business success mean grow bigger and toss off the sole proprietor moniker? When small business owners start to consider incorporating, surprisingly the advice is often “No, not now, the rules are more beneficial to not being incorporated." One key - If you live on your profit, you have nothing to shelter. Corporations are a separate entity from the business owner. Corporations have their own legal status, property, rights and liabilities, fees and paperwork. The money and assets belong to the corporation, not the individual or shareholders.

Test your business for a couple of years then decide. Is your intention to go big or are you giving this dream a shot? One motivator to staying small is less reporting headaches; for instance simpler tax prep. Not necessarily easy, (you still need to have beautiful record keeping and understand what is deductable, regardless of who prepares your taxes) but simpler than a corporation.

Here’s another “soft” reason: small can be happier. When you run your own business, you can chose to stay small, and keep the business the way you want it. Once an owner decides to do that, the pressure to compete with the big dudes is lifted. Many small business owners just want to work for themselves doing something they care about. Financial return is an obvious factor, but, passion, and lifestyle flexibility carry a lot of weight too.

It is true that small business owners do make less on average than their W2 counterparts, and less than their own previous W2 lives yielded. Yet, they stay. We usually use sales, profit, and growth to measure business success. So, when you're building a business, are you looking to maximize profit or maximize happiness? They're not mutually exclusive, of course, but they're also not the same.

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