If you’re running a business, you’ve hopefully learned that you can’t do it all yourself. No matter what type of business you’re in, outsourcing processes to experts is of the utmost importance. Unfortunately, most business owners don’t realize that delegating entity management is also the key to running a successful business.

7 Benefits of Entity Management

1. Privacy
2. Save Money on Taxes
3. Registered Agent Services
4. Corporate Concierge
5. Compliance and Transparency
6. Risk Management
7. More Time to Run Your Business

What is an Entity?

An entity is the legal name for your business. No matter how many people work for your business, the state looks at the entire enterprise as one entity. Possible entity types include a sole proprietorship, LLC, corporation, and partnership.

No matter your entity type, you will need some sort of organization in terms of governance and compliance. The larger your business is, the more important corporate structure becomes. It’s nearly impossible to take care of all of it yourself, even with entity management software. And while you certainly want to have a say in matters of corporate governance, it would behoove you to delegate legal entity issues to a qualified business attorney, like ownership structure, corporate compliance, and contract management.

Truthfully, you don’t need to be a behemoth Fortune 500 company with global entity management needs to benefit from entity information. Corporate entities of all sizes, partnerships, limited liability companies, and even sole proprietorships can benefit from hiring a third party manage paperwork.

What is Entity Management?

Entity management is all about keeping the legal paperwork in order so that it can be tracked and viewed as needed, along with making sure the company stays compliant with federal, state, and local regulations. In some cases, an entity management company will offer ancillary services, like human resources and accounting.

Entity governance of a small business—including compliance tasks like obtaining the right permits—may only need the attention of a single managing entity. This can usually be handled by a lawyer who manages multiple entities. But a diligent corporation—such as one with more complex issues of regulatory compliance and shareholders who demand transparent and responsive accounting of corporate performance—might require a legal team. Either way, just as a business of any size or entity type is the singular unit of a legal entity, the person or organization conducting their legal entity management is the entity manager; a sort of steward of entity information and corporate services.

Generally speaking, the more you can push off your plate, the better. If you’re like most business owners, you’re working 50 hours per week (or more). Much of that work is not related to the front end of running the business, but rather the paperwork behind it. This is especially difficult for business owners who got into their business because it was their passion, only to find it has more drudgery than the proverbial nine to five. Alternatively, some business owners are fully immersed in the very business they love, and they fall behind on important paperwork, miss important dates, and lose important notices. In some cases, this can cost you the business you worked so hard to build.

Business owners tend to get bogged down in paperwork that they could have passed on to someone else, such as filing their taxes or making sure they have the right business permits. Entrepreneurs are known to be an independent breed, and it can be hard for some of them to turn over any part of management to someone else. But once they do engage with an entity manager, they realize there a number of benefits to doing so.

7 Benefits of Entity Management

1. Privacy

One of the less apparent benefits to entity management is privacy. When you register a business, a patent, or trademark, you run the risk of putting your personal information into the public, especially if your business involves providing services out of your home.

More troubling than the annoying flood of commercial solicitations is the very real threat of frivolous lawsuits, fraud, and theft. An entity management team can create structure to your LLC, corporation, sole proprietorship, or partnership to provide personal privacy.

Relying on a packaged entity management system will not provide you with the most comprehensive legal guidance on how to conceal your personal identity and all places it might be listed. This is where working with an entity manager can be of great benefit.

2. Save Money on Taxes

Another great benefit to entity management is that you’ll pay less taxes. The tax code is very confusing, and it’s even more confusing when it comes to business taxes. A competent tax advisor can help you brainstorm legal ways to save money.

For example, if you are running a service-based business from your home, you might be using the standard home office deduction when you could save more money using the area method or the number of rooms method.

There are other tax credits and tax breaks you may not know about that a tax professional will. A good entity manager will take a look at your accounting and provide insight on the ways you can minimize taxes to your bottom line. This true whether your business is a large corporation or if you are operating as a sole proprietor.

3. Registered Agent Services

A registered agent is the person you appoint to handle all incoming legal paperwork. For most small business owners, that usually means the owner of the business. Unfortunately, it’s fairly easy to take an important document and throw it into a pile on your desk before exiting the office to deal with a disgruntled customer or take an important phone call. If you have an entity manager receive all important paperwork, you won’t miss important notices; ensuring you have a clean corporate record and avoid late potential late fees and fines.

Keep in mind that the lawyer or legal firm you solicit for assistance in registered agent services is a point person or organization for receiving official government correspondence. They are not meant to receive marketing materials or solicitations from banks and credit card companies. They can, however, assist you in structuring your business to make sure that all such types of marketing materials arrive at a P.O. Box instead of your personal residence. This might be especially important if you run a business from home and find yourself inundated with B2B solicitations.

4. Corporate Concierge

A company specializing in entity management for business is not going to be a corporate secretary in the sense of booking your hotel, airfare, and lunch reservations, so you may be wondering why they deserve the accolade of being a concierge. That’s because they will serve as a one-stop-shop for any inquiries related to compliance, taxes, and other legal concerns.

Do you have a question about what permits you need to open a second location? Confused about which tax forms to fill out this year? Not sure what to do with a legal notice you received in the mail? Your entity manager will know, which saves you the time tracking it down on Google—or worse, getting on the phone with government customer service.

An entity manager as a corporate concierge is particularly useful if their business expertise includes tax strategy and compliance. That’s because in addition to managing these concerns as independent entities, they may be able to offer advice where these concerns intersect.

5. Compliance and Transparency

An entity manager will make sure your business is staying compliant in terms of reporting corporate data and the ledger of intercompany transactions. This is especially important to help your business avoid fees and fines. In some cases, working with such an accounting and/or legal department can ensure your business stays afloat.

Your entity manager will also have an organized way of keeping track of the legal paperwork, entity data, and tax filing documents you need to hold on to so that your business and its accounting stays accurate. In the unlikely event of an audit (or even a future merger or acquisition), you will appreciate someone keeping track of the numbers and paperwork.

Remember, not all accountants are equal in terms of their care and competence. Working with an entity manager who is familiar with your business, location, and market can do wonders in terms of finding the most tax breaks while staying transparent and compliant.

6. Risk Management

An entity manager, like an accounting and law firm, can help you avoid risk. Legal considerations and tax codes are difficult to navigate, and taking the wrong path can cost time and money. An entity manager who knows their stuff will make sure you’re doing the right thing the first time around, reducing stress and risk.

In terms of business strategy, they also offer insights gleaned from the real-world experience of working with other businesses and their familiarity with legal and tax-based considerations. Many times, someone gets into business because it’s their passion, and they don’t  always consider some of the backend details that can derail their business (at worst) or (at the very least) make it unprofitable to the point of not being worth pursuing. Working with an entity manager who is knowledgeable about the tax code can significantly reduce these risks.

7. More Time to Run Your Business

Perhaps the greatest benefit of having someone else manage your business entity is that you’ll have more time to run your business. Because your time is at a premium, this is going to save you a lot of stress in the long run.

Many people start their own business because they’re passionate about a certain area—whether that’s food, beauty, childcare, or consulting. But a few years into running their business, they get burnt out. You can avoid one of the biggest causes of this burnout by having someone else do the heavy lifting when it comes to entity management.

Entity Management Saves Time, Stress, and Money

Whether you’re a sole proprietor doing graphic design, a corporation with several brick-and-mortar restaurants, or an LLC with a portfolio or rental properties, your business, its subsidiaries, and everyone on your payroll is an entity. Appointing someone to be the entity manager will provide many business benefits and reduce the amount of time, money, and stress it takes to run your business.

As always, take advantage of our free educational content and every other Tuesday we have Toby’s Tax Tuesday, a great educational series. Our Structure Implementation Series answers your questions about how to structure your business entities to protect you and your assets.

Additional Resources:

• Claim your FREE Strategy Session, and learn how Anderson Advisors can protect your assets.
• Join our next Tax & Asset Protection event to learn more advanced tax minimization & entity structuring strategies
• For all things investing, check out the Infinity Investing YouTube channel
• Subscribe to our YouTube channel to make sure you never miss the latest strategies & updates

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