Choose And Determine the Right Business.
Whether you are thinking of starting a business from scratch or already own your business or planning to buying an existing business, choosing the right business structure can have a major impact on the future success of your enterprise as well as your personal tax and estate planning.
It is advisable to consider a range of factors before making a decision. Some important factors include the location and nature of your business, the number of people involved, your potential exposure to liability, taxation considerations, and the company’s financial requirements. Consulting an experienced legal professional and tax accountant is also important. Your professional advisors can help ensure that you are well informed on important matters like the legal and taxation issues that you may encounter. You must understand the personal and business implications of your decisions.
Sole Proprietorship
This is the simplest form of business organization and is often the most inexpensive to set up. This can be a good option for small enterprises because you, as the business owner, have direct control over business decisions and receive all the profits.
Partnership
Partnerships can be relatively easy to set up and often have low start-up costs. A key advantage of having partners is that they generally provide a broader management base, along with bringing additional sources of investment capital. However, finding suitable partners can be a challenge. In addition, this kind of business structure can mean a division of authority, so there is potential for conflict between the partners. To avoid this, it is advisable to sign a partnership agreement. Though not essential, it can help minimize potential conflict. In many cases, it protects the interests of individual partners in the event of disagreement or dissolution of the business, sets out the terms of business, and generally defines how the partners will share the business profits.
Corporations
Another popular business structure. A corporation is a separate legal entity from its shareholders but has all the legal characteristics of an individual. It can incur legal liability, own property, lend, borrow and carry on business. Corporations also file an annual corporate tax return. It is also easier to raise investment capital for a corporation and you may find that the size and resources of an incorporated business make it easier to attract specialized management expertise. So, if you’re thinking of starting or investing in a corporation, you are looking at greater business continuity as shares can be bought and sold without affecting the company’s continued operation. You will be required to hold annual shareholder meetings, meet certain recordkeeping obligations and possibly comply with legislative requirements specific to your industry. This can mean more administrative, legal and accounting expenditures.
Family Business
A family-owned business often represents more than half the value of the owner’s estate. Consequently, if much of your net worth is tied up in the business, you may be less well diversified than those who have a more traditional retirement portfolio. Remember that unlike a salaried employee, it’s up to you to fund your own retirement. Strategize it well if you are relying on being able to sell your business for a sum that will enable you to enjoy a financially secure retirement. If you haven’t given further thought to that far-off day, consider that many business owners each year are unable to sell their businesses for a variety of reasons. These include difficulties finding a suitable buyer and obtaining financing for the successor, once they have been identified.
Quick Business Planning Tip
Inexpensive and simple to set up, sole proprietorships are generally more suitable for smaller enterprises with a single owner/manager who wants direct personal control. Costs are usually higher with partnerships and corporations, but it’s easier to raise investment capital, making them a better choice for larger enterprises. They also offer tax and legal advantages that may appeal to certain enterprises regardless of size. Remember you can change your business structure as your business develops and circumstances change. However, while you are in it, make sure you have it well-planned and sorted, in terms of sustainability. Contact HyperEffects for our free one-hour session to learn about things that help your business grow. Also, if you need help in creating and maintaining a website, we are your answer to all the marketing and cyber development requirements.
