Before You Leap Into Entrepreneurship, Ask This... "LLC or Special Purpose Entity?"

Lately, a some of my clients have been asking the same question: “If I’m ready to start something of my own, should I form an LLC or a Special Purpose Entity (SPE)?”

It’s a smart question, especially right now.

Because if you’re feeling the ground shake beneath your feet, you’re not imagining it.

Over the last nine months, the American economy has felt uneasy.

• The job market is stalling. Openings are slowing down, raises are rare, and even those who still feel “secure” sense that something is shifting beneath them.

• Financial gain feels like an illusion. Wages have ticked up slightly, but inflation and housing costs continue to erode purchasing power. According to the Bureau of Labor Statistics, real wages in mid-2025 were still down 2.1% from pre-pandemic levels after adjusting for inflation.

• And politics aren’t helping. Government shutdown threats, trade uncertainty, and policy whiplash have created a kind of ambient anxiety that is hard to ignore.

So it is no wonder that more professionals are asking: If I can’t count on my employer, should I start something myself?

The answer might be yes, but you will need the right foundation.

When people begin to take control of their financial future, the first step is structure. Not mindset. Not branding. Not marketing. Structure. That means deciding how you want your business or project to exist legally and financially. And that is where most people pause, especially when terms like LLC and SPE enter the conversation.

Let’s demystify both.

The Case for the LLC: Flexibility Meets Protection

A Limited Liability Company (LLC) is the most common structure for small business owners and entrepreneurs. In 2021, over 2.2 million LLC tax filings were recorded in the United States, more than any other business entity type.

Why? Because it is simple, flexible, and protective.

• Liability Protection: Your personal assets (home, savings, etc.) are shielded from business debts or lawsuits, which offers peace of mind in uncertain times.

• Tax Flexibility: LLCs are “pass-through” by default, meaning profits are taxed only once, but you can elect to be taxed as an S-Corp or C-Corp later if it benefits you.

• Operational Freedom: You can manage the company yourself or appoint others. You can grow, pivot, or partner as you evolve.

• Low Maintenance: Less paperwork, fewer formalities, and more control than a traditional corporation.

If you want to build something that can grow, whether it is a coaching practice, a real estate investment group, or an online business, the LLC is often the smartest starting point.

It is the entrepreneurial equivalent of a Swiss Army knife: adaptable, protective, and built for real-world use.

The Case for the Special Purpose Entity: Risk Isolation at Its Finest

A Special Purpose Entity (SPE), also called a Special Purpose Vehicle (SPV), serves a different role. It is not about running a business day to day. It is about isolating risk for a specific project or asset.

Here’s an example: Imagine you are developing a small apartment building. You might create an SPE just for that project, a container that holds the property, manages financing, and keeps liabilities from spilling over into your personal finances or other investments.

SPEs are standard in real estate, film production, and structured finance because they are what lenders and investors trust. They are designed to be “bankruptcy remote,” meaning that if one project fails, the damage stops there.

That level of protection comes with a price: more legal structure, more restrictions, and higher administrative costs. You cannot use an SPE for day-to-day operations. It is a focused tool, not a flexible one.

If you are looking to build a sustainable business that can grow, employ others, or expand into new services, go with the LLC. It is flexible, it evolves with you, and it lets you learn as you grow.

If you are pursuing a high-stakes project that involves outside investors, real estate, or asset-backed financing, then an SPE might make sense. It is about insulating risk and protecting your broader financial health.

And here is a little-known truth: You can combine them. Many entrepreneurs use an LLC as their main business structure and then form SPEs underneath it for specific projects or partnerships.

It is like building your business on bedrock: flexibility at the top, stability beneath.

When clients ask me these questions, I hear more than curiosity about tax codes and liability law.

I hear a quiet but growing realization:

“If the world feels fragile, maybe it is time to build something of my own.” And I understand. We are living in a time when economic instability has become personal. People want agency, purpose, and protection, not just income.

Choosing between an LLC and an SPE is not just a legal decision. It is a statement: I am ready to take ownership of my future.

Reflection & Next Step

Ask yourself:

1. Am I building a business that will evolve over time?

2. Or am I managing a project that needs clear boundaries and risk isolation?

3. What am I trying to protect: my future, or my finances (or both)?

If you can answer those honestly, your next move will become clear. If you can't perhaps coaching can help.

Sources:

• Bureau of Labor Statistics (2025). Real Earnings Summary.

• Southern California Law Review (2013). Bankruptcy-Remote SPEs: Myth and Reality.

• Dechert LLP (2020). Bankruptcy-Remote Entities in Commercial Real Estate Transactions.

• IRS Data Book (2022). Business Tax Filings by Entity Type.

• National Small Business Association (2020). Small Business Survey.