Know the basics of starting a business
Starting and managing a business takes ambition, desire and hard work. It also
takes a great deal of research and planning.
The goal of any business is to be successful. To increase your chances for success,
you should explore and evaluate your business and personal goals. This information
will help you build a complete and thorough business plan.
Generating a business plan will help you think through important issues that you may
not have considered. Your plan will become an important tool as you start to think
about financing your business. It should also provide goals and objectives to help
measure your success.
The US Small Business Administration offers an interactive business startup
checklist to help determine your business' needs.
Types of business organizations
When starting a new business, an important decisions to be made is choosing the right
structure. The pros and cons of a sole proprietorship, a partnership and a corporation are
listed below.
Sole proprietorship
In a sole proprietorship, the owner has absolute authority over all business decisions.
This is the easiest and cheapest way to start a business. It can be formed by
finding a location and opening the door for business. There are likely to be fees
to register your business name and obtain other necessary licenses.
Partnership
There are several types of partnerships. A general partnership can be formed by an
oral agreement between two or more persons, but a written agreement is highly recommended.
Fees are higher than those for a sole proprietorship, but may be lower than incorporating.
A partnership agreement could be helpful in solving any disputes. However, you are
responsible for the your partner's business actions, as well as your own.
A written agreement should include the following:
- Type of business
- Amount of equity invested by each partner
- Division of profit or loss
- Partner's compensation
- Distribution of assets on dissolution
- Duration of partnership
- Provisions for changes or dissolving the partnership
- Dispute settlement clause
- Restrictions of authority and expenditures
- Settlement in case of death or incapacitation
Corporation
A business may incorporate without the help of an attorney, but legal advice is highly
recommended. The corporate structure is usually much more complex and costly to
organize than other formations. Small, closely held corporations can operate more
informally, but record-keeping cannot be eliminated entirely. Corporation officers
can be liable to stockholders for improper actions. Liability is generally limited
to stock ownership, except where fraud is involved.
Your business is our business
We're here to help make starting your own business as painless as possible. At Northwest
Community, we offer a variety of business services to suit
your needs. Contact us or visit your
local branch for more information about our
small business services.
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