Build Your Business on a Firm Foundation

When you are building a house, it’s vital to build your home on a firm foundation. The same thing is true when building a business. In my time as a business consultant, I’ve seen far too many people build their business on the sand.

Are you familiar with the story of the two men who built houses? One man built his house on a rock, and the other man built his house on the sand. When the rain and floodwaters came, the man who built his house on the sand was left with rubble. But the man who built his house on a rock-solid foundation was fine.

While it’s hard to know what your business will come up against, you must be prepared. This is why the majority of aspiring entrepreneurs set up LLCs for their business. But, in many cases, these business owners aren’t sure why or if an LLC is right. They were just told by a friend or someone else that they needed one.

Let’s start with the basics. LLC stands for Limited Liability Company. When an LLC is formed and maintained correctly, it provides liability protection for you as a business owner. In other words, if something goes wrong with your business and you face any legal action, you can’t be held personally liable, and your personal assets are protected.

But, it’s critical that the LLC was correctly formed for any of it to work as intended.

I’ve seen many aspiring entrepreneurs use a cheap online filing service or get help from a friend who has filed an LLC before. I get it. You have limited funds as you start your business, and you want to find a cost-effective way. But this is where you can encounter problems later.

All LLCs are not the same. Each state has different filing requirements. It is critical to understand the specific statutes that govern your state and make sure your LLC is customized for your business. When filing your LLC, you will need:

  • Articles of Organization
  • Operating Agreement
  • Federal Tax ID#
  • Membership Subscription Agreement
  • Membership Certificates & Ledger
  • Register of Officers, Managers, Governors
  • Declaration of Management Structure (i.e., Member-Managed, Manager-Managed, Board of Governor-Managed)
  • Bank Authorization Resolution
  • Organizational Meeting Minutes
  • Etc.


If your LLC is not done correctly, you are not any better off than the man who built his house on the sand. When you use an online filing service or get help from a friend, you are getting what you paid for, and you may not be protected long-term, which is likely going to cost you more than if you were to have just invested in a better foundation at the get-go. This is why it is crucial to avoid the cheap, sub-standard service or the DIY approach.

If the LLC’s liability protection is rendered worthless, you can be held personally and financially responsible for any legal action against your business. No one wants that.

Piercing the Corporate Veil is a legal metaphor for when a court disregards the separation between your business and you. It means you and your personal assets are exposed. I will talk more about this concept in the future.

Starting a business is hard enough. I want to help you make sure your business is built on a firm foundation that will protect you and the wealth you are accumulating.

This was a lot of information to take in, and I’d love to help answer any questions you may have. Please, feel free to schedule a call with me or shoot me an email at kent@kentgustafson.com.

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