Becoming a consultant is a great way to put your business experience and skills to use helping others improve their businesses. There are many types of consultants, from management consultants who help executives make their organizations more efficient, to IT consultants who help companies implement the right IT solutions, to philanthropy consultants who help nonprofit organizations raise funds. Whichever consulting niche you decide to focus in on, there are a few things you should consider first.

Do You Have What it Takes?

Answering some simple questions can go a long way in determining if you will be successful as a consultant. Take a few minutes to think through these couple questions:

1. What marketable skills do I have? To differentiate yourself from the crowd, you'll need to specialize in a niche. For example, an IT consultant might specialize in cyber security issues; a management consultant might specialize in business process improvement. What specialty will you focus on?
2. Am I good at sales? You'll need sales and marketing know-how to network, form relationships and pitch your services to clients. Consultants must constantly seek referrals and leads and be able to present their value in a clear and convincing manner.
3. Do I manage time well? Consultants must be effective time managers to juggle their clients' demands and to maximize their billable hours. Keep in mind, not everything you work on is billable.

Getting Started

Before running out and pitching clients your consulting services or taking on large projects, you may want to consider incorporating your consulting business. Incorporating or forming an LLC as a consulting business can offer a number of advantages.

• Limit Your Liability: Since part of your professional duties involve advising others on their business matters, if someone feels that your consulting advice caused them damage, they can sue you to recover their losses. Without an LLC or corporation shielding your personal property from business liability, the losses you could incur are unlimited. Forming a corporation or LLC will keep your personal assets off-limits when it comes to satisfying business financial judgments.
• Tax Advantages: There are many tax benefits to incorporating or forming an LLC. LLCs generally have 'pass-through' taxation, but can elect to be taxed as an S Corporation if it's beneficial. S Corporations help you avoid double taxation of company profits and dividends. Be sure to meet with your accountant to fully explore your tax possibilities and make sure the corporate structure you choose meets those needs.
• Enhanced Credibility: When you form an LLC or corporation, you will be known publicly by your business name followed by 'Inc' or 'LLC.' This gives your businesses added professionalism and helps show that you are established and reputable. Some businesses may require you to be incorporated or have an LLC before they will work with you to avoid any confusion that that you, or your staff, might be considered employed by them if they work with you.
• Brand Protection: When you file as a corporation or an LLC, other companies cannot file with your company name. This helps protect your consulting company's reputation and also gives you a foundation for protecting your business and services from infringement.
• Expense Deduction: As an LLC or corporation, you will be allowed to deduct normal business expenses from the company income before the income is allocated to you. Business expenses can include items such as salary, rent (portion of your mortgage if you work from home), travel, mobile devices and more. This means that the money you put toward growing your consulting practice can be deducted from business income before your taxable income is determined.

Next Steps

There are a number of other steps and actions to consider when starting a consulting business. At incorporate.com, we consider ourselves experts at small business and entrepreneurial endeavors. We're happy to discuss your needs and the benefits of forming a more formal structure for your consulting business.