I decided to create a business. I'm in need of some advice on how to start forming my business. I have a well-developed plan but I am not sure exactly how it will be financed and whether or not I want to take on partners. I am interested and willing to learn the intricacies of my options to determine how to best proceed with my plan. I have not decided which type of legal business structure would be best for me. What advice would you provide in making this choice?
Please advise on what my options are, the advantages and disadvantages of each, and possible tax consequences for each scenario?
Legal business structure
Creating a business that will be successful takes a lot of forethought and planning. You mentioned that you have a well-developed business plan, but really much of what you have included in your plan requires that you have already made some decisions.
You need to decide what you will want to sell; a product or a service. My guess is that you have already decided, but in order to make sure that you are making money instead of starting an expensive hobby, you should decide and make preparations accordingly.
If it is a service, how much time do you have to spend on each service job, and how many service jobs can you anticipate to have. How will you let potential customers know that you are available to provide the service? Also, what supplies and/or equipment do you need to perform your service, and do you have the funds to supply the number of service jobs in order to make a specified profit every week, or month?
If it is a product that you are selling, how much raw material do you need to produce each unit, and do you have a supplier, and can you purchase enough material to produce enough goods to make a profit? Do you have the skills necessary to produce each unit within a specific amount of time to produce enough units to show a profit by the end of each production period (a week, or a month)? If you do not have the skills, are there others that you can either hire or consult with in order to make those skills available? How can you correctly store finished goods and keep track of them until they are delivered to the customer - in fact, how will you deliver their goods to them? Do you have a definite plan to maintain consistent quality of all of the goods that you produce?
You can see that the decision to have business that will provide a service or a product will strongly affect the business plan. Most small businesses in the US are service businesses, but product based businesses are still being formed.
There are three general types of legal business structures: the sole proprietorship, the partnership, and the corporation.
Some advantages of sole proprietorships are that it is the easiest to form, it doesn't usually cost as much to start up, and you have complete control of the business (within legal limits). Most of the time, what you need is a business employer ...
Legal ownership business structures are determined. The best proceed with the plan is determined.