Mind Ya Business
The most important decision business owners will make in the initial stages of building their brand will relate to its infrastructure. Specifically, how are you going to build this house of business and how can you build it to withstand certain outside dangers that may come your way all in the name of doing business? Determining the proper corporate structure is imperative for both liability and tax purposes. Building your empire on sinking sand is of course not a good idea, therefore incorporating and/or organizing to protect your interests is 100% necessary.
Most creative people in fashion and entertainment generally start off as a sole proprietor. A sketch here and there at your local cafe, creating melodies and music for a local band in your basement studio, and/or writing a press release for your friend who is launching an Incubator Program for her fabulous HFR Movement are all starting points for highly successful entrepreneurs.
You may wake up one day and decide, "Hey, not only can I make money and create from my vision, but I can also build this creative gift into a career and lucrative business." The most basic structure to "do business" is known as a d/b/a ("doing business as"). The benefits of a DBA include low costs.....and yea, that will be about it ! A DBA does not afford protection of your personal assets should, God forbid, a dispute arise between you and your manufacturer and down the line judgments, costs, liens, etc. are assessed against your business. Not only will your business be responsible for said fees, assessments, judgments, etc., you personally can also be liable which places your most valuable personal possessions (i.e. - home, car, bank accounts) at risk of garnishment, replevin and/or lien.
Though a DBA is the easiest form of business ownership, the most common form of organization is known as an LLC (or Limited Liability Company). According to the Internal Revenue Service, LLCs are more popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation, which means as a business owner you will only be taxed once on a personal level. Owners of an LLC are called members. Most states permit “single member” LLCs, those having only one owner (you, by yourself, building on your vision). There are individual state rules as it relates to the formation and existence of an LLC so be certain to consult with an attorney prior to organizing. When I first organized my firm, J. Maples & Associates, PLLC (Professional Limited Liability Company), I did so as a sole member and I did so in Texas for certain tax purposes. I have since dissolved said TX PLLC and reformed as an NY S-Corporation.
The most important nuggets I would like for you to take away from the next couple of column entries is the critical necessity of protecting not only your creations, but protecting your own personal hind parts as well !
As a contributor to the site, I will seek to provide practical business and legal affair advice that may assist in your endeavors in not only the fashion sector, but also any other avenue you may pursue.
