I need help in responding to the following questions, relative to a new, one-owner, etiquette and image consulting corporation that for now operates only in the United States:
1. Identify and evaluate the main sources of risk for your business.
2. Explain your plan for dealing with risk by developing a contingency plan.
SOLUTION: Identify and evaluate the main sources of risk for your business.
The US Census estimates that there are 10.4 million self-employed people now representing an economic force to be reckoned with.
Jason Deshayes, CPA in Albuquerque opines that Sole proprietorships are easy to i) set up; ii) requiring very little legal work and iii) beyond the purview of a business license.
While ease of setting up is definitely an advantage but also represents risks also as without registering you will not have a TAX ID number required for client invoicing.
A sole entrepreneurship business faces several risks irrespective of the type and nature of the business. You are the sole decision maker, have freedom to work as and when you like, the entire profit as well as loss is your own, all the assets and liabilities are yours as there is no separation between you and the business. The biggest challenge is that you don't have a "wall" like an established company to fall back upon in the case of emergency or in times of need.
Freedom to work as and when you like is a misconception as unless you work you won't get a "pay check" and for that a steady stream of client is always urgently needed. It forces you to work much harder and for long hours. You simply can't afford to lose a major client.
Your ability to get personal finances depends on the financial discipline you have been practicing and your personal spending habits. You have to maintain an excellent credit rating. If by chance you get sued you loose you entire personal property plus your business holding. However, if you have incorporated your business you get a layer of protection between you and any losses your company may incur.
The solution provides glimpses of various aspects of business type, risks involved, dispelling a misconception that as a single ownership proprietor you don't have to work hard, procuring loans from financial institutions, how far your insurance company comes to help and for what, knowledge of relative laws, about Etiquette and Image Consulting Corporation, and your Contingency plan, converting a sole proprietorship to an S corporation etc.