Your firearms training legal structure should depend on various factors, such as the type of business you are running, the size of the company, the number of owners, and the services you plan to offer. Some famous legal structures for businesses include LLCs, sole proprietorships, partnerships, and corporations. You should consult with a lawyer to determine the best legal structure for your business.
There are essentially three business models you can follow:
- Sole Proprietor: This is the least expensive of your options, but it also comes with the most exposure to risk. As a sole proprietor, all your assets are at risk should a student bring a lawsuit against you. When we speak of all your assets, that means everything you own, from your car to your house and everything else. If the student wins the lawsuit, you could be subject to paying the award and, most likely, their legal fees. If this occurs, the court can compel you to sell your car, or boat, liquidate bank accounts, or “tap the till” (confiscate future sales) to satisfy the settlement. Once these resources are exhausted, the court can place a lien on your home to force the compensation to be paid (with interest) when you sell your home. Finally, and perhaps most importantly, your credit will be ruined because you, not your business, are liable for the debt. Everyone’s position differs, so you must talk to your attorney before adopting this business.
- Limited Liability Company: The LLC is a popular form of protection amongst many firearm instructors. The concept is the company owns its assets and debts, separate and removed from your personal assets and debts. If a student brings a lawsuit, they are only entitled to what the business owns and nothing more. If they win and bankrupt the business, only the company files bankruptcy, not you personally, which protects your credit rating.
LLCs are also popular because the tax filing requirements with the Internal Revenue Service (IRS) are far less complicated than the full-blown “C Corp” model. In many cases, you can apply additional cost-saving tax strategies you normally cannot apply with the sole-proprietary business model. Your attorney should be able to assist you in determining whether an LLC is the right choice.
- Corporation: A corporation offers you similar protection as the LLC but becomes quite burdened with IRS tax filings which must be filed promptly, generally quarterly. Miss a deadline and Uncle Sam hits you with fines, late fees, and hefty interest charges. However, a corporation can provide some additional layers of protection especially related to your asset protection strategy. Here again, your attorney would be the one to discuss this option.
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