Sole Proprietorships And The National Debt [Listen]
During research for the Saturday edition of Open for Business I came across a disturbing statistic.
(Listen below as Tom and Shane Discuss Sole Proprietorship and our National Debt)
There are 23 million businesses in the United States that are designated as Sole Proprietorships. Why would 23 million businesses be disturbing?
Sole Proprietorship examples include small businesses, such as a single person art studio, a local grocery, or an computer consultation service.
The moment you start offering goods and services to others, you form a Sole Proprietorship. It's that simple.
You may need a business license if you do business within the city limits. Gallatin Country has no business license requirements, and none are required in the State of Montana.
Legally, there is no distinction between you and your business. And that’s the disturbing part.
If you'ee a Sole Proprietor and you are sued and lose in court all your personal assets can be seized to satisfy the judgement. Your home, cars, saving, retirement, investments could all be taken leaving you with nothing.
How Do You Protect Your Home and Business?
The answer is very simple. Incorporation. If you’re a small business you get a simple one-page form from the state, pay $70 and now your business becomes a separate entity.
That means that if the business is sued your personal assets are untouchable because they are now separated from your business assets.
Your personal assets are not protected by incorporation if you committed fraud or a crime while doing business.
Government Debt vs. Public Debt
During the second half of this segment Shane and I talked about the National Debt and public debt.
The two are often combined inaccurately. The national debt is a composite of all the debt you and I and our government owe for everything.
Your mortgage, credit cards, student loans, plus investments are all included. Also, government securities stocks bonds and other financial instruments are included.
The Federal Debt is what we use to run Washington, DC. and all its agencies. That debt is a about $4.5 trillion dollars each year.
That is funded by taxes, tariffs and other fees the Federal Government collects each year.
Debt Is Not A Bad Thing
Do you have a favorite brand of car? Is there a possibility that the dealership might have gone into debt to start up? Was that a bad thing?
The Louisiana Purchase was made with borrowed money. You could also include the National Highway System, the space program, personal computers, the Internet, cell phones, any of those you’d like to do without?
The only time debt is bad is when it’s unmanageable. Controlled debt is an invaluable tool in the growth of America.
Some Final Thoughts
Saving and using money makes the world go ‘round. If a dollar makes a dollar that’s a good thing. For all of us.
Debt and business go hand in hand. They always have. Take value (borrowed dollars) and return value (needed goods and services) is how the free enterprise entrepreneurial system works. Comments below.