Have you decided to start your own business? Well, remember that there are several things that you must think things through. At the very beginning you need to decide on what form your going to use. Are you going to incorporate, become a LLC, a partnership, or are you just going to have a sole proprietorship. In this article, we will talk about the two most popular options. The most popular way for a small business owner to get started is with a sole proprietorship. The second most popular is a partnership. As you will see, theses two options are also relatively easy to set up.
A small business owner can have many advantages from a sole proprietorship. For one thing, they control it. There is no need to answer to another person, though it wouldn’t hurt to take some advice. Another thing is that they get all profits, it’s easy to set up, and all decisions are made by them. This is nice because with most other business entities they would have to answer to someone else, and make decisions with another person. One of the most convenient things about a sole proprietorship is that there are fewer government restrictions.
Despite all of these obviously nice advantages, there are a few disadvantages as well. One major one is unlimited liability, if you’re sued. That means that you and all of your things are at risk. It can easily be more difficult to raise funds. The owner may have to dip into their personal funds or loans just to help pay for the business. They will also find that the stock options often make it difficult to find good employees that will want a portion of the company that they work for.
If you’re looking for something that puts a little less on you, you might try a partnership. A partnership is when two or more people share the ownership of a business, and they often share in controlling and decision making as well.
A partnership is relatively easy to form. One thing that you must do to protect yourself is create a legally binding partnership. This way you are less likely to have a dispute over responsibilities and amount of work that each partner needs to do.
In this agreement you need to include how decisions are made, profits distributed, disputes resolved, admitting new partners, how to back out of a partnership, and what has to be done to dissolve a partnership.
There are several advantages to a partnership, including how easy it is to form, how the profits flow directly to the owners, the fact that there is more than one person running everything, and the increased chances to raise capital.
There are also a few disadvantages. If the business is sued, then all of the partners are liable. Even if only one partner makes a mistake all of them are liable. All of the profits have to be shared, there could be disagreements, and the partnership may end up dissolving if a partner dies or one of them withdraws.
Though there are several other options, these are the two most popular for small business owners.
