SolveYourProblem eBusiness Series:
How To Start Your Own
Coaching or Consulting Business
( 18 pages )
   

How To Incorporate Your Consulting Business

Once you decided that a career in consulting is right for you, there are a few things you can take care of from the get go to ensure a smooth transition into the world of professional consultancy. Organization plays a key role in all phases of a consultant’s career. From the early stages of planning the business structure and types consulting you wish to engage in, to the execution of daily workflow, to the discipline required to keep legally sound income and tax records, being a consultant can mean being efficient and thorough in the areas of organization and planning. Whenever possible, it is recommended to plan as far ahead as possible for matters that can be planned ahead for.

• Establish your businesses’ legal/fiscal foundation. It is in your best interest to formalize and solidify your business structure right from the onset. This is in the interest of having a well thought out plan both legally and for tax purposes. In a nutshell, the three basic ways you can set up your business from a legal standpoint are:

1. Sole proprietorship: This is the easiest to accomplish from a legal point and requires the least investment of time and funds to do. However, it should be noted, that sole proprietors accept all business related liabilities at a personal level. To put this in another way, in the eyes of the law, the individual and the business are for all intents and purposes the same entity. So, for example, if in the course of your business dealings you come under legal scrutiny for any reason (being sued by a client, for instance), resulting litigation may be able to hold your personal finances and assets as damages to the plaintiff in the case. To put it bluntly, you are putting your butt on the line when you engage in a sole proprietorship.
   
2. Partnership: This approach is similar to sole proprietorship, but involves two individuals who share legal and fiscal responsibility for the business together. This partnership can be instituted in a variety of ways and typically involves the interested parties negotiating a contract that elaborates legally on the particulars of the partnership “deal”. For example, there are “silent” partnerships, which involve certain parties within the contract holding all legal obligations but not participating in the actual running of the business.
   
3. Corporation: A corporation is the most legally and fiscally complicated method of starting a business, but has its benefits as well. When a business is incorporated it becomes a legal entity of its own. Incorporation allows for businesses to take greater strategic risks than sole proprietorships and partnerships because they provide for a legal and fiscal layer between the corporate entity and the individuals involved in the business. Under normal circumstances, someone starting out in the consulting world will not have the need or the resources to incorporate, but it is common for consulting firms (such as Booz-Allen-Hamilton, for example) to establish their business in this manner.

Editor's Note: I chose a Limited Liability Company for my internet based business. It's got the protection of a corporation, but the benefits of a sole proprietorship. Best choice I made. Ask your financial professional or accountant for their advice if this is appropriate in a consulting/coachng setting.

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