First, I would like to thank you for taking time to read this business blog. As a business owner, I know you time is very valuable, and most likely you are on the lookout for information that is relevant for your business and personal growth. I did a video on Facebook the other day about the comparison between business structures and the story of the “Three Little Pigs.”
You are probably familiar with the story. There were three pigs who set out on their journey of life, and before leaving home, their mother told them to do the best in life with what ever they do.
Of course there is an adversary in the story, the “big bad wolf.” Unbeknownst to the little pigs, they will face opposition after their homes are built.
As you know, the first little pig happily builds his house of straw. The big bad wolf comes to huff and puff and blow the pigs straw house down and succeeds.
The wolf sees an easy target with the second pig who builds his house of wood. So he huffs and puffs and successfully blows down the wood house.
Well, by this time, the two pig brothers have both sought out refuge at the brick house of their brother.
The wolf comes to take vengeance out on the pigs and have a good meal; but, he huffs and puffs to blow the brick house down, and it doesn’t move. Well, the relentless wolf decides to take a dive down the chimney, and the elder pig brother comes up with a brilliant idea – light a fire.
The wolf jumps down the chimney to his death, and of course the pigs get to live another day and thrive.
What does this have to do with business?
I like to compare the straw house to a Sole Proprietorship. It is an unprotected entity similar to the straw house. The pig who built that straw house had a false sense of protection along with a sense of accomplishment, but as soon as adversity comes, the structure doesn’t hold up under the pressure. The business and the owner of a sole proprietorship are not separate; therefore, the liability is all on the owner of the company. If a law suit arises or any other judgment against the business, the owner’s personal assets are at risk and will be sought after to satisfy any judgment against the company.
The wood house is a bit more steady, but it is still able to fall under pressure, and I like to compare an LLC or Corporation that do not have credibility built to this type of house. If credibility is not built for the business apart from the owners, the owners are still personally liable for any debt or judgments against the company. Therefore the brick house is the best structure; what is the brick house?
The brick house is the house that is an LLC or a Corporation that has its business credibility built. The owners and the business are separate from each other. The owners do not use their SSN’s to build credit, but they use the EIN of the company and/or the DUN’s number.
The business owners are protected and when the winds of adversity hit, the structure is there to stand another day.
For the video that I created about this metaphoric example, please feel free to click here.
Thank you again for reading my blog, and please feel free to share. If you are interested in building your business credit, you may call 888-387-1117 for immediate assistance.