The military has spawned many acronyms that are used as short references for official and strategic purposes. But life as a member of the five services (don’t forget the Coast Guard) has also inspired other syntax shortcuts that are less than official. Some of these cultural coinages are straight forward and handy, some are sweetly sarcastic (and some can’t be explained in polite company).
One prominent example of such a military culture acronym that’s always handy and sometimes used sarcastically is RHIP, which stands for, “Rank Has Its Privileges.” RHIP is the unofficial contraction for the accrual of a benefits hierarchy based on a person’s rank and applies to sergeants and generals alike. In his comedy “History of the World,” Mel Brooks’ character said it another way with, “It’s good to be the king.”
In that spirit, here’s an acronym I’ve coined for small business owners: OHIP, which stands for “Ownership Has Its Privileges.” Like RHIP, OHIP can be sarcastic and/or handy. Let’s look at a few business-ownership privileges, beginning with sarcastic applications and winding up with the handy.
By virtue of being the owner, you have the privilege of working all you want. That means you’ve earned the right to work half-days. And as a bonus, you get to choose which 12 of the 24.
If you so choose, you can brand the company with your name, which can be pretty rich ego food. Think Sears, Macy’s, Ford and Wal-Mart. But this privilege is also handy for a plaintiff’s attorney – the one who represents the customer who “slipped and fell” in your business – to identify at least two of the co-defendants in the lawsuit: the legal entity and its founder. You know – the one who ate the ego food.
When getting a bank loan, almost all small business owners are afforded the high honor of signing their name twice on loan documents. Having perfected the belt-and-suspenders approach, banks provide you with this special privilege to encumber your business assets and personal estate as a double guarantee in case you default.
But seriously folks, as Mel Brooks might say, there are many real ownership privileges, including these:
Structure your small business as a legal entity, like a Sub Chapter S Corporation (S Corp) or a Limited Liability Company (LLC). Both file tax returns, but don’t pay taxes. This step is handy because it passes any business income or loss through to shareholders or members, respectively, thus avoiding double taxation of distributions, as in the case of a C Corp.
Additionally, S Corps and LLCs allow owners the privilege of sheltering personal assets from liabilities that befall the business through what’s called the corporate veil. But beware, the veil evaporates if the liability is traced to you, the shareholder, or when you make that second sig on the banknote.
Finally, here’s my favorite OHIP example – I call it the Stealth Benefit of business ownership. It’s where you personally own the real estate your business operates in, making you the landlord. For example, John Jones is the owner of Jones and Company, Inc. located at 21 Enterprise Blvd. Mr. Jones also owns that real estate and all improvements personally – outside the corporation. As if he were any other landlord, Jones and Co leases the property from John who receives rental income, tax advantages, and asset appreciation. And John can raise the rent with the market rent appreciation, which sometimes is handy as an alternative to having the business give him a pay raise.
One more privilege of my Stealth Benefit: More times than not, when a business owner/landlord retires, the appreciated, paid for real estate can be sold for more than the business is worth, or converted into handy monthly rental income from a new tenant.
There are many other examples of how OHIP is real and compelling. Are you taking advantage of the privileges of business ownership?
Write this on a rock … To Paraphrase Mel, it’s good to be the owner.