Most businesses choose some form of incorporation whether it’s a LLC or a C-corporation. Each has individual advantages from legal and tax perspectives. What you may not know about is the untapped benefit of any form of incorporation. This benefit will help both you and your employees
- weather the ups and downs and sideways emotionally,
- manage finances, and
- embrace the unknown.
What is this benefit? It’s buried in the legal definition–that corporations are considered persons. Why is this benefit virtually unknown? It’s because we all face the very human challenge of having the capacity to separate ourselves from businesses. It’s a very human, universal challenge whether you are CEO/Founder or “financial para-planner” or “production manager” or Director of Sales or even COO. It’s too easy to think you are your job or your company. But, realizing your firm is a “person” may help in this process.
Suppose we internalize the reality that our companies are “persons” separate from ourselves. Let’s examine the three areas where you’ll experience transformation:
Weathering the cyclical nature of business “success”
It’s quite natural to ride the ups as the downs in business. Acquiring new clients, launching new products and making new acquisitions are exciting times for a business. They put a bounce in our step and help us look forward to each Monday. On the other hand, employee “challenges” or unexpected departures, delayed or underfunded projects, or changes in the market or regulatory environment can put knots in our stomachs.
What if, on the other hand, the success or challenge resides with “You, Inc., LLC” and not Mr. Business Owner? Now there’s a potential to separate your sense of well-being from either the ups or downs…and to leave it with the business.
Taking care of your Key Employees
Utilization of time and money are two areas where owners most often make “excuses.” While it is true that the buck stops with the owner, many owners either take too much or too little time off or pay themselves too little or too much.
As the business owner, it is a fact that you are a, if not the key employee. Remembering that you run You, Inc., LLC, consider how you would treat someone else who’s a key employee:
- Would you dock their pay if cash flow is tight? Or, if times are flush would you let her take whatever she wants out of the business? Consider the impact on You, Inc., LLC. If Key Employee #1 is being underpaid: what’s her attitude toward the business? Resentment is sure to fester. If Key Employee is starving You, Inc., LLC of working capital, wouldn’t you fire her for fraud? As the owner and fiduciary of You, Inc., you’re responsible for defining and respecting that boundary between you and your corporation.
- Similarly, how long can Key Employee work 70 hour weeks? That’s unsustainable. Or, if Key Employee is needed 40 hours but works only 20, how does this impact the health of You, Inc., LLC? You’re not getting the most from that key employee and you need to have a loving but firm talk with him!
Challenge the known and embrace the unknown.*
It’s human nature to do the opposite—to embrace the known and fear the unknown. I remember many life changes—some chosen, some imposed on me—that I resisted. Hindsight is 20-20: in every case I wish I had embraced the unknown and made or accepted those changes sooner.
In the past, a few of my unknowns included
- attempting a PhD in economics (but stopping with a M.A.).
- jumping from a “nice” non-profit to large “cutthroat” corporations (“interesting” 10-year, multiple career stint).
- being pushed from large corporations into the unknown (twice in 3 years).
- starting a business (great 5 years and counting).
- investing in my business for the future (two examples: developing a website, hiring part-time staff).
What’s your short list of unknowns you need to embrace?
Here are a few you might include:
- Preparing your business (and yourself) for a future sale
- Hiring your next employee
- Facing the truth about what’s needs fixing in your business.
How might treating You, Inc. as a person transform some aspect of your current firm?
Consider these questions to help you build a better relationship with your firm:
- Should you spend more or less time on your business? Set a concrete goal for yourself.
- Does your current corporate structure lend itself to your current plan for You, Inc.? What do you need to do to respect the boundaries of your firm?