How is a consulting business structured?

The consulting company model is to run a consulting business with a team instead of doing all the customer-facing work yourself (like a solo consultant). For smaller consulting firms, a single-level structure consists of an executive who oversees the entire organization of consultants in one or more business units. For larger consulting firms, a two-tier structure usually includes a senior executive who oversees the operation and a second level of managers who oversee each business unit and its consultants. The top executive is usually a partner or owner of the organization.

As a result, single-member LLCs are often the best option for individual consultants. The work you will do for other companies is directly related to you, and a mistake on your part can easily be attributed to you. Not having your personal assets involved will make getting the job done less stressful. But either way, consider buying professional liability insurance to protect yourself in the event of legal liabilities.

Unlike sole proprietorships, C corporation shareholders are generally exempt from personal liability for business debts, even if a shareholder has a significant interest in the company. These employees are often referred to as senior consultants and, in the future, they will move to a management position. Operations managers are more concerned with company operations, while project managers are more concerned with the operations of certain consulting projects. But regardless of what happens with the overall size of the consulting market, there are plenty of ways to build a successful consulting business.

Understand that you have a variety of options for your company when it comes to choosing your business structure; choosing your company structure comes down to what works best for you. Consultants from other units can be trained to carry out the responsibilities of the new business units and move them laterally within the organizational structure. When deciding between these four business entities, first ask yourself if you want or need to join as a consultant. The corporation must also elect a board of directors, which will delegate business activities to people in the company known as officers.

A sole proprietorship is the easiest way to own a small business, since it's just you and your personal (legal) name, without a company's own identity. It's not uncommon for a consultant to depend on another consultant at the same level, or even for a junior partner in a management position to have more high-level partners in charge. Because of the two different ways of organizing a consulting business, most consulting firms combine both into a matrix structure. Even if you initially decide to opt for a sole proprietorship, you can choose to form a single-member LLC for your consulting business at any time.

And that's how we've helped consulting firm owners like Doug Nelson, Michele Benton, Dan Burgos, and many more consultants like you create successful boutique consulting firms.

Ernest Oesterling
Ernest Oesterling

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