Is Forming an LLC Really That Risky?

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If you have dreams of being an entrepreneur, something must be holding you back from starting your first business. There could be any number of reasons but would you be surprised to know that some of the top reasons on your list may not be good reasons at all? Let’s look at one of the reasons that forming an LLC or other formal small business isn’t quite as risky as you might think.

Somewhere high on your list you might be worried about failing. Serial entrepreneur Adam Toren (*) recently wrote about this subject and challenged the idea that a business startup owner is far more at risk than somebody who works for a company.

First, how secure is your job? Even if you’re one of the select few people who have what is referred to as a recession proof job, those jobs are in jeopardy. Teachers and nurses, often seen as professions that survive through any economy have become part of the 9% of unemployed Americans in great numbers but chances are, your job isn’t as secure as you think.

What if you were to lose your job and how long would it take for you to find a new one? If you’re like most, finding a new job will take some time and you’ll probably have to settle for less money requiring you to work more than one job to pay the bills. When you work for somebody else, you’re hoping that you can find somebody who allows you to make money and when you leave, your only hope is to find somebody else that will allow you to make money at their company. You don’t have any way of earning a living on your own.

Now, what if you were to start your own business? Yes, it’s going to take some money, a whole lot of time, and it might be a year or more before you really start to see a good income from your new business. It’s a lot of work for little reward at first but you’re gaining something in the process. First, you have job security. You hired you and you’re not going to fire you when your company downsizes. You aren’t relying on somebody else to allow you to make money, you’re in charge of your income and once you learn how to start one business, starting another isn’t nearly as hard. As Mr. Toren put it, now that he’s an entrepreneur, he knows of dozens of low cost ways to start a business and make money. He will never again be unable to earn a living. He doesn’t need the help of another company.

When you work for a company, you’re relying on them for your income and if they fire you, you have few options. When you’re an entrepreneur, you’re relying on you for income and that’s a much better way to live.

Which of these options is more risky?


(*) Adam Toren is the co- author of Small Business, Big Vision: “Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right” along with his brother Matthew,