People often assume that money and finances will always be associated with stress, confusion, and worry. Or that more money will automatically lead to a feeling of financial freedom. However, it is possible to have a healthy relationship with money, regardless of your income! There are a number of “toxic” mentalities that can lead to an unhealthy relationship with money. Here are some of the most common and why they are negatively affecting your life.
You’re an Emotional Spender
If a tough day at work or a fight with your significant other often ends up with you reaching for your credit cards, you are an emotional spender. This can be a dangerous mentality because what may start out as harmless pick-me-ups can eventually lead to mountains of debt. This, in turn, will only add to the amount of stress in your life. If you’ve noticed this habit in yourself, try to look for other ways to de-stress and don’t rely on spending to create a false sense of happiness.
You’re a Stressed-Out Spender
If even the smallest purchases stress you out and lead to feelings of guilt and anxiety, this means you essentially fear your money and spending it. A big reason why this could be is because you simply don’t feel like you have enough money to go around. Regardless of what your income is, if spending leads to stress, having a budget in place could help you avoid these feelings. A budget can help you see what’s coming in and what’s going out, and ultimately help you better manage your cash flow so that you can spend without feeling like you’re being reckless or that you’ll run out of money.
Photo Courtesy of The Huffington Post
You’re an Avoider
If your bills often end up in your kitchen drawer or you’re dodging calls from debt collectors, this means you may be an avoider. Denial and avoidance are common coping mechanisms, but only make the problem worse. While avoiding confronting your finances may make you feel better in the short term, this mentality leads to an ever-increasing toxic relationship with your money. A hallmark of financial responsibility to taking action to acknowledge your financial struggles and take steps to get back on track. This may be as simple as catching up on some overdue bills or it may mean speaking with a debt attorney.
You’re Waiting to Make More Money
Something that comes as a surprise to a lot of people? Making more money won’t solve your financial issues. In fact, it can often exacerbate them.
If you don’t practice healthy financial habits when your income is more limited, you are only more prone to reckless financial management when there’s more to spend. So don’t wait for your next raise or career move to start being more financially responsible.
Make efforts to achieve financial wellness now – such as budgeting, saving, investing, etc. That way, once you are in a position where you are making more money, you’ll already have developed good financial habits and be in a better position to put your higher income to good use.
You’re Constantly Comparing Yourself to Others
Trying to keep up with others – what they make and what they spend it on – can be emotionally exhausting. The truth is, there will always be people who have more money than you and who can afford things you can’t – and that’s ok! It’s important to come to this realization and be accepting of it. As long as you make efforts to responsibly manage the money that you do have and create goals for yourself, you’ll still come out on top. As they say, the grass is always greener!
Your relationship with money is often overlooked, but it’s one of the most important relationships in your life. It’s a relationship that should be nurtured and problems within it should be acknowledged. Many people are guilty of having one or more of these mentalities that create a toxic relationship with money. Once you acknowledge them and make efforts to improve your relationship with money, you’ll feel like a weight has been lifted off your shoulders!
Business entities can be defined as the corporate, tax and legal structures which an organization chooses to officially follow at the time of its official registration with the state authorities. In total, there are fifteen different types of business entities, which would be the following.
- Sole Proprietorship
- General Partnership
- Limited Partnership or LP
- Limited Liability Partnership or LLP
- Limited Liability Limited Partnership or LLLP
- Limited Liability Company or LLC
- Professional LLC
- Professional Corporation
- Nonprofit Organization
- Cooperative Organization
As estates, municipalities and nonprofits do not concern the main topic here, the following discussions will exclude the three.
Importance of the State: The Same Corporate Structure Will Vary from State to State
All organizations must register themselves as entities at the state level in United States, so the rules and regulations governing them differ quite a bit, based on the state in question.
What this means is that a Texas LLC for example will not operate under the same rules and regulations as an LLC registered in New York. Also, an LLC in Texas can have the same name as another company that is registered in a different state, but it's not advisable given how difficult it could become in the future while filing for patents.
To know more about such quirks and step-by-step instructions on how to start an LLC in Texas, visit howtostartanllc.com, and you could get started with the online process immediately. The information and services on the website are not just limited to Texas LLC organizations either, but they have a dedicated page for guiding fresh entrepreneurs through the corporate tax structures in every state.
Sole Proprietorship: Default for Freelancers and Consultants
There is only one owner or head in a sole proprietorship, and that's what makes it ideal for one-man businesses that deal with freelance work and consulting services. Single man sole proprietorships are automatic in nature, therefore, registration with the state is unnecessary.
Sole proprietorships are also suited to a degree for singular teams such as a small construction crew, a group of handymen, or even miniature establishments in retail. Also, this puts the owner's personal financial status at jeopardy.
Due to the fact that a sole proprietorship entity puts all responsibilities for paying taxes and returning loans, it directly jeopardizes the sole proprietor's personal belongings in case of a lawsuit, or even after a failed loan repayment.
This is the main reason why even the most miniature establishments find LLCs to be a better option, but this is not the only reason either. Sole proprietors also find it hard to start their business credit or even get significant business loans.
General Partnership: Equal Responsibilities
The only significant difference between a General Partnership and a Sole Proprietorship is the fact that two or more owners share responsibilities and liabilities equally in a General Partnership, as opposed to there being only one responsible and liable party in the latter. Other than that, they more or less share the same pros and cons.
Registration with the state is not necessary in most cases, and although it still puts the finances of the business owners at risk here, the partnership divides the liability, making it a slightly better option than sole proprietorship for small teams of skilled workers or even small restaurants and such.
Limited Partnership: Active and Investing Partners
A Limited Partnership (LP) has to be registered with a state and whether it has just two or more partners, there are two different types of partners in all LP establishments.
The active partner or the general partner is the one who is responsible and liable for operating the business in its entirety. The silent or investing partner, on the other hand, is the one who invests funds or other resources into the organization. The latter has very limited liability or control over the company's operations.
It's a perfect way for investors to put their money into a sector that they are personally not experienced with, but have access to people who do. From the perspective of the general partners, they have similar responsibilities and liabilities to those in a general partnership.
It's the default strategy for startups to find funding and as long as the idea is sound, it has made way for multiple successful entrepreneurial ventures in the recent past. However, personal liability still looms as a dangerous prospect for the active partners to consider.
Limited Liability Company and Professional LLC
Small businesses have no better entity structure to follow than the LLC, given that it takes multiple good ideas from various corporate structures, virtually eliminating most cons that are inherent to them. Any and all small businesses that are in a position to or are in requirement of signing up with their respective state, usually choose an LLC entity because of the following reasons:
- It removes the dangerous aspect of personal liability if the business falls in debt or is sued for reparations
- The state offers the choice of choosing between corporation and partnership tax slabs
- The limited legalities and paperwork make it suited for small businesses
While more expensive than a general partnership or a sole proprietorship, a professional LLC is going to be a much safer choice for freelancers and consultants, especially if it involves risk of any kind. This makes it ideal for even single man businesses such a physician's practice or the consultancy services of an accountant.
B, C and S-Corporation
By definition, all corporation entities share most of the same attributes and as the term suggests, they're more suited for larger or at least medium sized businesses in any sector. The differences between the three are vast once you delve into the tax structures which govern each entity.
However, the basic differences can be observed by simply taking a look at each of their definitive descriptions, as stated below.
C-Corporation – This is the default corporate entity for large or medium-large businesses, complete with a board of directors, a CEO/CEOs, other executive officers and shareholders.
The shareholders or owners are not liable for debts or legal dispute settlements in a C-Corporation, and they may qualify for lower tax slabs than is possible in any other corporate structure. On becoming big enough, they also have the option to become a publicly traded company, which is ideal for generating growth investments.
B- Corporation – the same rules apply as a C-Corporation, but due to their registered and certified commitment to social and environmental standards maintenance, B-Corporations will have a more lenient tax structure to deal with.
S-Corporation – Almost identical to a C-Corporation, the difference is in scale, as S-Corporations are only meant for small businesses, general partnerships and even sole proprietors. The main difference here is that due to the creation of a pass-through entity, aka a S-Corporation, the owner/owners do not have liability for business debt and legal disputes. They also are not taxed on the corporate slab.
Cooperative: Limited Application
A cooperation structure in most cases is a voluntary partnership of limited responsibilities that binds people in mutual interest - it is an inefficient structure due to the voluntary nature of its legal bindings, which often makes it unsuitable for traditional business operations. Nevertheless, the limited liability clause exempts all members of a cooperative from having personal liability for paying debts and settling claims.
This should clear up most of the confusion surrounding the core concepts and their suitability. In case you are wondering why the Professional Corporation structure wasn't mentioned, then that's because it has very limited applications. Meant for self-employed, skilled professionals or small organizations founded by them, they have less appeal now in comparison to an LLC or an S-Corporation.