How To Start A Small Business. This Essay Encomposes The Financing, Corporation Types And Difficulties In Operating A Business With Family Members.

978 words - 4 pages

There are some important issues to consider when starting a small business.Small businesses here in the United States currently represent over 98% of the of the labor force (Business Essentials, 2003). When starting a new business you will need a business plan and financing. You must consider the legal issues involved as well as structure, especially when dealing with a family business.A business plan is a valuable tool to allow a business to look ahead, allocate resources, focus on key points, and prepare for problems and opportunities (Quicken Small Business, 2003). The businesses plan is not difficult to do. There are various formats and outlines available. Depending on your needs, your business plan can have all or some of the following; description of the company, produce or service, market, forecasts, management team, and financial analysis (Quicken Small Business, 2003). A business plan will help the business owner decide how long it should take for your business to become profitable, and if it is worth pursuing. Financial institutions and investors will more often than not require a business plan when you apply for any type of loan or funding.There are many different financing options available to the small business owner. There are two basic types of financing, equity and debt financing. If your firm has a high ratio of equity to debt, you will probably seek debt financing. Most small businesses are limited to equity financing since they have limited equity available (SBA Financing Basics, 2003). Some of the most popular types of financing are; venture capitalists, small business investment companies (SBIC), friends and family, personal savings, banks, investors and governmental agencies (Business Essentials, 2003). The SBA, Small Business Association, has many financing options available too; Basic Loan Guaranty, Certified Development Company, Microloan Loan Program, Working Capital, International Trade Loans, Qualified Employee and the Certified Employee Trusts Loan Program (SBA, Financing, 2003). Each of these loans has different requirements and qualification standards. Banks are reluctant of offer long term loans, where the loans through the SBA tend to have a longer maturity date. It is easier to acquire a loan through the SBA than it is through regular financial institutions. The SBA generally finances small businesses that do not qualify for bank financing. The biggest draw back with accepting money from a venture capitalist is that this isn't really a loan, it is an investment. Generally, a venture capitalist will require that they have a representative on the board of directors, and may require that managers receive approval from them before making major decisions (Business Essentials, 2003).When deciding what type of company to organize, you must consider your liabilities and tax responsibilities. When you have a sole proprietorship, the company is owned and operated by one person. This type of company will have unlimited...

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