An average person has an innovative plan to start a business. It begins with an idea but what should they do afterwards. If someone wants to start a business they must ask themselves several questions. What is the size of the business? What level of control do they want to have? What are the business risk and vulnerabilities? What are the initial startup expenses? All of these questions will help them decide which legal form of business they should choose. As a legal form can have significant implications for your personal risk in the business as well as your potential for financial returns (Page 6 of 17 - How to Incorporate | Inc.com. (n.d.). Retrieved from http://www.inc.com/how-to-incorporate/130). The three different types of legal business forms are sole proprietorship, partnership and corporation. All of these have their advantages and disadvantages. Asking those questions and exploring the advantages and disadvantages, a potential business owner will be capable of deciding which legal form they should pursue.
What is the size of the business? Initially it will be a small business with the possibility that it will expand. What level of control do you want to have? Everyone dreams of becoming their own boss and is the reason most people go into business for themselves. What are the business vulnerabilities? Risk and liabilities should be determined and accounted for in the beginning. Risk and liabilities are a significant factor in determining coverage the business owner needs. What are the initial startup expenses? Depending on the nature of the business it could be just a business license. Other types of start-up expenses could include but are not limited to legal fees, material expenses, office space and labor. If expenses are at a minimum, there is no need to secure funding or else will have to secure additional funding or obtain investments.
Sole proprietorship is a business with one owner. The owner is the business, and the business is the owner (We’ve got the Answers – Northwest Texas Small Buiness…(n.d.). Retrieved from http:\www.nwtsbdc.org/FAQ_Answers.htm). Sole proprietorship is the quickest and easiest way to start a business. Having little to no financial assistance, sole proprietorship is the least expensive of the three business forms. The advantages of a sole proprietorship are being your own boss, low start-up cost, and comprehensible legal setup. Business profits are not shared with anyone else since there are no partners. One of the disadvantages of a sole proprietorship is unlimited liability meaning the owner is personally liable for all debts ensued. It is also difficult to secure funds to expand the business if needed.
A partnership is the same as a sole proprietorship except there is more than one owner. Since there is more than one business owner, owners will share all profits and responsibility. The owner and their partners and business are not separate...