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Monday, February 11, 2008

Keeping It Real (and Legal)



Having read-- and argued with-- and learned from-- Tim Ferris' Four Hour work Week, I now have a much better sense of what the possibilities are with monetizing my cat.

And as I learned from the Cash Machine anti-PF book, I think must set up a structure. We often overlook this in thinking of entrepreneurship. We think, "it's not about paperwork, but hard work; not LLCs, but sweat and sore knees."

But I want to be a more thoughtful CATpitalist. One who knows from the start that he can grow. After all, you can't lay a foundation for a ranch house and put a skyscraper on it. And I want CATpitalism to stretch to the skies.

So I am investigating various legal structures-- before I talk to a lawyer at $800 a minute! These NOLO legal books-- written by lawyers, and intended as legal advice (though more limited than an in-person lawyer)-- have helped me think about this a LOT. My basic options:
  • Sole Proprietorship. Which is what it is now, just money added to my taxes. If I want to sell the business, I can't. And all the profits go straight to my personal taxes.
  • Partnership. My cat and I share! Moving along...
  • Limited Liability Corporation. Your personal assets don't get nailed should your business go bankrupt. Whew! Profits still passed on to your personal taxes. Owned by its members.
  • Corporation. Both types are owned by their shareholders-- with a board of directors making decision. Shareholders have no personal liability.
    • C-Corporation. The standard, with profits able to be held at the corporate level to reduce overall taxes. Also, it has arcane "capital incentives..." Ooo, impressive...
    • S-Corporation. This is a mutt: half-LLC (for taxes), half C-Corp (for structure). Has no more than 100 shareholders. Too much passive income, like rent money coming in, can get you in hot water with the tax-dogs.
And remember: I am not legal advice! I'm learning this stuff as I go along. And I may hold serve as a Sole-P for a while yet. Need to read the tea leaves...

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