Do I Need To Worry About Legal Entities for Structuring My Business?

John: Hey, this is John Sonmez from
I’ve got a question here today that I’m going to have to give my little legal disclaimer
again. This one is about actual law about legal entities or about business, but I thought
I’d answer this question. Before I answer this question, I’m not a lawyer. I just play
one on TV. I’m not a doctor, surgeon or any of those things so I’m not giving you medical
advice, I’m not giving you legal advice, I’m just giving you my own advice and so you can
take it or leave it. With that said, here’s the question. This
question is from Alex and Alex says, “Hey John, first congratulations on the Joel Test
for Programmers blog post.” Just in case—what Alex is talking about is I did this blog post
on the Joel Test for Programmers and it ended up being front page hacker news. It was like
the top post on Hacker News so it got like 150,000 page views in like a few days which
was pretty crazy. Thanks for that Alex. That was pretty cool.
Alex says, “I have picked my niche. It’s SignalR.” Alex is responding actually to
my blogging course which tells him to pick a niche, which I always say specialize, right?
That’s good, Alex. He says, “I do have a couple of questions for you that I thought
I might be able to find on” which is my podcast for entrepreneur developers,
“But I couldn’t. I have a day job. I also freelance on the weekends and now I’m going
to start a blog and maybe one day take in revenue from the blog. I’m going to start
an LLC? And report earnings for freelancing in the blog to the LLC filed under my SSN.
“Also, I’m going to build a site similar to but not for flights or rental
cars that will mine data or other websites for the best deal. The revenue will come from
ads and referrals. Should this new site be under the first LLC? Can I later move this
site under a separate LLC if it takes off? Should it even be an LLC? Is there any risk
of just getting this site up and seeing if it makes more money than the hosting feeds
before I spend money on registering an LLC? I’m guessing you already have these answers
out there in a podcast somewhere because you are a freak of nature and have a podcast for
everything.” Thanks Alex. I don’t think I’ve really addressed this
one. Maybe I’ve talked about this a little bit but this is kind of an interesting discussion
of whether or not—what should you do. Again, just so I’m perfectly clear, I’m not a
lawyer so do not take this as legal advice and then structure your company this way and
then sue me if it all blows up and it doesn’t work out. I’ll give you my take on what
I think about this. I try to keep things as simple as possible.
Obviously my tagline is, “Making the complex simple.” The simplest thing—well, I’ve
talked about this a lot in videos and stuff is that that people have all these great ideas
but then they lack execution. I’ve also talked about the idea that you spend a lot
of money on all kinds of stuff and then you never actually execute. I tend to be a person
that says go and do the thing first and then figure out the details later, buy the company,
buy the paperwork, do all that kind of stuff later.
If you’re trying to start a business, if you’re going to set this site up, this web
application you’re going to make money from ad revenue then go and do it and start making
some money. Until you make money you have no problem, right? You don’t have a real
issue so you shouldn’t really invest a lot of money in a legal structure for the business
if one, you’re not going to make any money from the business and two, you might not even
carry it out. We all have these dreams and ideas and my idea has changed from week to
week. Hopefully I execute on a majority of them or some of them, but some of them don’t
get executed on. A lot of times people will spend a lot of
time researching legal entities and structures for a business that they never actually are
going to build and worse yet a lot of times when you start off at something you have some
energy and some motivation to get something done and you can waste all that talking to
lawyers and accountants trying to set up legal entities for businesses. Don’t waste all
that. Try to start with the simplest thing first. The simplest thing is getting your
website up and trying to get some customers and test the idea.
Once you have a business or once you actually have income coming in then you can worry about
that. In fact, not only can you then worry about it but let’s say you’re making money
from this business then you can actually afford to hire someone a lot more professional than
I am to give you advice on legal entity for the business, just don’t get ripped off.
Just be careful on that. That’s the idea. Just start simple. Don’t worry about all
this stuff. For now if I were just going to tell you the simple road that I would advice
is just set up one LLC and have everything be under that one LLC and that’s it.
I mean that’s what I do even at the level where my business is making a decent amount
of money now I still have just one LLC. I don’t find the need for a more complicated
legal structure. Now, maybe I’m doing things wrong. Maybe I should—but you know what,
so far it hasn’t been a problem for me. I can’t really foresee why it would. Maybe
in the future as I grow and grow then I’ll change things. But I think just having a simple
LLC that all of your business stuff happens under is a real simple approach.
I’ve got a professional accountant. The accountant doesn’t seem to have a problem
with it. It makes a lot of sense to me. It doesn’t require a whole bunch of paperwork
and overhead so keep things simple. That’s what I would say. Yeah, hopefully when you
do reach the point where you’re super successful and you’ve got a multi-million dollar business
then you can afford to pay for some real legal advice that will help you to structure your
business in the way that’s going to work the best for you.
All right, well, hopefully that is helpful to you Alex and to any of you watching out
there. Remember, just go out there and execute, do something. So many people get stuck up
in all these questions about how to do things and they never actually do it. Not saying
you shouldn’t do your due diligence but just make sure that you air on the side of
execution versus anything else. If you have a question, email me at [email protected]
If you like this video share it, thumbs up it and definitely, definitely subscribe. Talk
to you next time.

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2 thoughts on “Do I Need To Worry About Legal Entities for Structuring My Business?

  1. Do I even need an LOC? I think I can implement something on the cheap. Should I get an LOC so that I have all my business expenses in one place, or is it okay to use a personal credit/debit card at the beginning? I appreciate it.

  2. John, thank you so much for answering my questions with this video. I took your advice and executed my website and have even started making some money. For those that are interested, the site is it's similar to however it shows you the best price and even applies coupons for moving truck rentals. The site even goes a step further be allowing you to setup a price watch on a rental you have already book to email you if the price ever drops. This will allow you to re-book at the lower rate.

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