Starting a residual income what way is better?

When I was reading Early Retirement Extreme and Building a Better World in your Backyard specifically the bit about the BEER plan. I found that these books did not talk about setting up a LLC, company or other business structure. Is it necessary to set up a structure in the beginning or is there a point that it makes sense to set one up? I know there is a cost to set up a business and it can vary in price and legal requirements were a person lives.

My limited understanding of legal business structures mostly suggests that people make them to protect themselves from bankruptcy and possibly for tax purposes.

So, I would think if you are planning on taking on a bunch of debt or some other risky practice, then it would be in your interest to consider your legal options for protection.

I am not a legal expert or anything close, so take my response with a grain of salt.

If you are going to be doing business under a trade name or plan on selling any taxable product you should get a business license from your state department. Here in Washington it is like $50 for a sole proprietor license. Setting up an LLC or S-Corp will save on taxes in the long run, but isn't really worth it unless you are making six figures off the business, they are also much more complicated to set up.

If you don't you will have the IRS to deal with. aaaannndd....





The government likes their tax dollars. You could go sole proprietor > LLC > S-Corp as you scale your business but the point is you should have a license of some kind no matter what state you are in. (Unless you do everything in cash, bitcoin and barter and just not report your earnings, but you can't leave a paper trail)


Doing so can also protect you from say if you were to be sued from loosing personal belonging in a lawsuit. Whereas if a business is sued you only risk business assets. (Keep your personal and business bank accounts separate).

T Simpson wrote:

Doing so can also protect you from say if you were to be sued from loosing personal belonging in a lawsuit. Whereas if a business is sued you only risk business assets. (Keep your personal and business bank accounts separate).

A very good point. Having an business structure would protect my personal assets and could make paying taxes and other fees easy to do.