Starting your own business will be an emotional adventure with many rewards. However, you need to be prepared and you should understand essential factors. If you are not familiar with the process of starting a new business, I recommend with the following steps:
A Business Plan:
A plan defines your business with precision, identifies your goals, and serves as the curriculum of your company. There are certain elements that interrogate into a business plan. For example: the purpose of your business, description, demographics, competition, operational procedures, personnel, insurances, financial information, loan solicitation, balance point analysis, and profit projection models. The United States Small Business Administration (SBA) offers help to edit your business plan online.
Determine Your Type of Business
One of the first decisions that you must make as a business owner is how to build your company’s infrastructure. This decision will have long range implications, so we recommend to you, dear reader, to consult with an accountant and a corporate lawyer. They will help you pick the type of business most beneficial for you.
The great majority of small businesses are started with only one owner. These companies are in the hands of one person who normally is responsible for day-to-day operations.
Pros: Sole ownership is the simplest and cheapest way to possess and organize a business venture. You will have total control; possess all the profits generated by your business. The profits will directly flow towards the declarations of personal taxes. If you desire, it will be easy to dissolve your business.
Cons: You will be responsible to cover all your costs. You will have the legal obligation to pay all debts incurred. You will put at risk all personal and business valuables. You can be at a disadvantage in gathering funds. More times than not you will be limited to using your personal savings or making individual loans.
In a partnership, two or more people share the ownership of only one business. The law does not distinguish between the business entity and it’s owners.
Pros: The business venture will be easier to establish. However, it is necessary to invest time in the establishment of a contract between the owners of the business. It is also easier to gather funding. The profits flow directly to the tax declarations of each of the partners.
Cons: All partners are individually and collectively responsible for the actions of the other partners within the entity. All profits should be shared by other partners. All decisions are made by the collective partnership; there will be the probability of disagreement with the day to day operation of the business. In fact, count on it.
There are different types of partnerships to be considered. They are: General Partnerships, Limited Partnership, Limited Liability Partnership (LLP) and Joint Ventures.
A corporation is regulated by the laws of the state in which it’s home office resides. It is considered a non-human entity, separate and apart from it’s owners. In this business model, the corporations are called shareholders. There must be one shareholder. However, there is no upper limit in how many shareholders own the corporation.
Pros: The shareholders have a limited responsibility with respect of debts incurred and judgments made against the corporation. The shareholders are only responsible for their stock investments of the company. Shareholders can create more capital through the sale of their stocks.
Cons: It requires more time and finances compared with the other business models discussed. Corporations are supervised and subject to the entity’s established norms. The incorporation of a company can be subject to the increase of tax debt to local, state, and federal government agencies.
There are different types of corporations to be considered. They are: Subchapter S-Corporation, Subchapter C-Corporation and Limited Liability Company (LLC).
Registering Your Business Name
Before you start a business, you should decide what your venture will be called? The name of your business is one of its most important assets. You should register the name to prevent it’s accidental use by another entity. You may have to file for trademark protection at the state and federal level, if appropriate. Click here for more details.
Your chances of a successful start and development of your small business are increased if you are a member of a minority. Contact SCORE at (800) 643-0245 or visit their website to take advantage of their small business counselor/adviser programs. SCORE also offers seminars and workshops focused on starting small businesses and maintaining it within your county.
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