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Old 08-29-2007, 11:17 AM   #1
LJ Team
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Default Starting a business

NOLO: TYPES OF OWNERSHIP STRUCTURES

Learn about the corporation, LLC, partnership, and sole proprietorship.

Before you can decide how you want to structure your business, you'll need to know what your options are. Here's a brief rundown on the most common ways to organize a business:
  • sole proprietorship
  • partnership
  • limited partnership
  • limited liability company (LLC)
  • corporation (for-profit)
  • nonprofit corporation (not-for-profit), and
  • cooperative


Sole Proprietorships and Partnerships

For many new businesses, the best initial ownership structure is either a sole proprietorship or -- if more than one owner is involved -- a partnership.

Sole Proprietorships

A sole proprietorship is a one-person business that is not registered with the state like a limited liability company (LLC) or corporation. You don't have to do anything special or file any papers to set up a sole proprietorship -- you create one just by going into business for yourself.

Legally, a sole proprietorship is inseparable from its owner -- the business and the owner are one and the same. This means the owner of the business reports business income and losses on his or her personal tax return and is personally liable for any business-related obligations, such as debts or court judgments.

Partnerships

Similarly, a partnership is simply a business owned by two or more people that hasn't filed papers to become a corporation or a limited liability company (LLC). You don't have to file any paperwork to form a partnership -- the arrangement begins as soon as you start a business with another person. As in a sole proprietorship, the partnership's owners pay taxes on their shares of the business income on their personal tax returns and they are each personally liable for the entire amount of any business debts and claims.

Sole proprietorships and partnerships make sense in a business where personal liability isn't a big worry -- for example, a small service business in which you are unlikely to be sued and for which you won't be borrowing much money for inventory or other costs.


Limited Partnerships

Limited partnerships are costly and complicated to set up and run, and are not recommended for the average small business owner. Limited partnerships are usually created by one person or company (the "general partner"), who will solicit investments from others (the "limited partners").

The general partner controls the limited partnership's day-to-day operations and is personally liable for business debts (unless the general partner is a corporation or an LLC). Limited partners have minimal control over daily business decisions or operations and, in return, they are not personally liable for business debts or claims. Consult a limited partnership expert if you're interested in creating this type of business.


Corporations and LLCs

Forming and operating an LLC or a corporation is a bit more complicated and costly, but well worth the trouble for some small businesses. The main benefit of an LLC or a corporation is that these structures limit the owners' personal liability for business debts and court judgments against the business.

What sets the corporation apart from all other types of businesses is that a corporation is an independent legal and tax entity, separate from the people who own, control and manage it. Because of this separate status, the owners of a corporation don't use their personal tax returns to pay tax on corporate profits -- the corporation itself pays these taxes. Owners pay personal income tax only on money they draw from the corporation in the form of salaries, bonuses, and the like.

Like corporations, LLCs provide limited personal liability for business debts and claims. But when it comes to taxes, LLCs are more like partnerships: the owners of an LLC pay taxes on their shares of the business income on their personal tax returns.

Corporations and LLCs make sense for business owners who either 1) run a risk of being sued by customers or of piling up a lot of business debts, or 2) have substantial personal assets they want to protect from business creditors.


Nonprofit Corporations

A nonprofit corporation is a corporation formed to carry out a charitable, educational, religious, literary ,or scientific purpose. A nonprofit can raise much-needed funds by soliciting public and private grant money and donations from individuals and companies. The federal and state governments do not generally tax nonprofit corporations on money they take in that is related to their nonprofit purpose, because of the benefits they contribute to society.


Cooperatives

Some people dream of forming a business of true equals -- an organization owned and operated democratically by its members. These grassroots business organizers often refer to their businesses as a "group," "collective," or "co-op" -- but these are often informal rather than legal labels. For example, a consumer co-op could be formed to run a food store, a bookstore, or any other retail business. Or a workers' co-op could be created to manufacture and sell arts and crafts. Most states do have specific laws dealing with the set-up of cooperatives, and in some states you can file paperwork with the secretary of state's office to have your cooperative formally recognized by the state. Check with your secretary of state's office for more information.


Next Steps

You may want to also read:

LLC or Corporation? How to Choose the Right Form for Your Business, by Anthony Mancuso (Nolo).

Nolo is the nation's oldest and most respected provider of legal information for consumers and small businesses. Since 1971, Nolo has offered affordable, plain-English books, forms and software on a wide range of legal issues, including wills, estate planning, retirement, elder care, personal finance, taxes, housing, real estate, divorce and child custody. For more information visit the Nolo's website at Nolo: Law Books, Legal Forms and Legal Software



DEVELOPING A BUSINESS IDEA AND GETTING STARTED

Business Names, Licenses, or Incorporations - Your State or Commonwealth
www.sba.gov


Create a Great Business Name
A great name is the beginning of a great brand. It should be memorable and create a certain feeling when heard. Here's a quick how-to on creating one and making sure it's not already used.
Create a Great Business Name


Checklist for Starting a Business - IRS
Most businesses start out small. As a new business owner you need to know your federal tax responsibilities. This page provides links to basic federal tax information for people who are starting a business. It also provides information to assist in making basic business decisions. The list should not be construed as all-inclusive. Other steps may be appropriate for your specific type of business.
Starting a Business


Developing a Business Idea
The location and development of viable business ideas is as much an art, or matter of luck, as the use of systematic techniques. Certainly, you can use structured approaches, as described below, but the reality is that having the right background, being in the right place at the right time, and working hard to create lucky breaks are likely to be just as important in coming up with sound business ideas.
Get Business Ideas: Find, Develop, Evaluate & Plan Business Ideas


Programs and services to help you start, grow and succeed - SBA
The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation.
www.sba.gov


Small Business Planner
Careful planning is fundamental to success. The Small Business Planner includes information and resources that will help you at any stage of the business lifecycle.
www.sba.gov


The 18 Mistakes That Kill Startups
In the Q & A period after a recent talk, someone asked what made startups fail. After standing there gaping for a few seconds I realized this was kind of a trick question.
The 18 Mistakes That Kill Startups


Evaluating Your Business Idea FAQ - Nolo
Thinking about starting your own business? Here are some questions you should ask yourself before you get started.
Evaluating Your Business Idea FAQ


Will My Business Make Money? - Nolo
Prepare a break-even analysis before spending time on a complete business plan.
Will My Business Make Money?


Starting and Researching the Right Business - Nolo
Your business should have a solid chance at profitability -- but it should also suit your particular skills and strengths.
Starting and Researching the Right Business


A Guide to Small Business Ownership
A guide to small business ownership outlines all of the important things to consider before starting a business, and offers guidance and resources on everything from writing a good business plan to securing funding to open a business, and how to operate a business.
A Guide to Small Business Ownership - (financesonline.org)



BUSINESS PLAN

Business plan - Wikipedia
This is a summary article that covers many topics related to business plans - their content, how they are used, legal issues, and spoofs of business plans, among others. See individual sections for links to detailed discussions of various topics relating to business plans.
Business plan - Wikipedia, the free encyclopedia


Business Plan Basic
A written guide to starting and running your business successfully is essential. This plan will encourage loans, promote growth, and provide a map for you to follow.
www.sba.gov


Business Plan Software, Samples and Strategy
Why You Need to Write a Business Plan
Learn why writing a business plan is important -- even if you're not trying to raise money.
Business Plan Center with a Library of Real Business Plans


Writing a Business Plan FAQ
Learn the what, when, why, and how of business plans.
Writing a Business Plan FAQ



BUYING A BUSINESS

Buying a Business
Entrepreneurship is a risky business. One way to reduce your risk is to buy an existing business that's already demonstrated an ability to successfully operate (hopefully at a profit). That confidence does come at a price, though, as you'll generally spend far more to buy a business than to start one from scratch. If you've got the funds, though, it's an excellent option.
Buying a Business


Buying a Business: What You Need to Know
Thinking about purchasing an existing business? Here are some things you should know before you take the plunge.
Buying a Business: What You Need to Know


Top 10 Mistakes Made When Buying a Business
Buying a business is a complex process, and it can be confounding because of the interplay of business, legal, and people issues. It can, however, be a rewarding process if it is the right business and you have done your homework and researched the business thoroughly.
Top 10 Mistakes Made When Buying a Business



HOME BUSINESS

Home-Based Businesses - US Government
What do Apple Computer, Hershey Chocolate, Mary Kay Cosmetics, and the Ford Motor Company have in common? They all started out as home-based businesses. Over half of all U.S. businesses are based out of an owner's home. Starting a home-based business has many rewards and challenges. This guide provides resources that will help you learn more about working out of your house, starting a home-based business, and managing your business within the law.
Home Based Business Resources | Business.gov


Zoning Rules for Home Businesses
Your zoning or planning department governs whether you can run a business out of your home.
Zoning Rules for Home Businesses



FRANCHISING

A Consumer Guide to Buying a Franchise
Facts for Consumers
Buying a Franchise: A Consumer Guide


Consumer Guide to Buying a Franchise
Many people dream of being an entrepreneur. By purchasing a franchise, you often can sell goods and services that have instant name recognition and can obtain training and ongoing support to help you succeed. But be cautious. Like any investment, purchasing a franchise is not a guarantee of success.
Consumer Guide to Buying a Franchise


Franchising.com
At Franchising.com you can learn how to make the right franchising decision, be a successful franchisee, and find the franchise opportunity that's right for you.
Franchise Opportunities - Franchising.com


10 Steps for Choosing the Right Franchise
There are many well-known franchise opportunities available in almost every industry you can think of. Some are well established with proven systems and support structures in place, while others are relatively new. Choosing the franchise that suits you will reduce risk and raise the levels of success.
10 Steps for Choosing the Right Franchise


Find the Right Franchise
11 Top Tips to Help Select the Perfect Business
A Guide to Researching Franchise Opportunities



IRS: STARTING A BUSINESS

Most businesses start out small. As a new business owner you need to know your federal tax responsibilities. This page provides links to basic federal tax information for people who are starting a business. It also provides information to assist in making basic business decisions. The list should not be construed as all-inclusive. Other steps may be appropriate for your specific type of business.


What New Business Owners Need to Know About Federal Taxes


Small Business: References
  • Small Business Resources
    Links to additional resources available from other federal and state agencies.
  • Online Classroom
    The Small Business/Self-Employed online classroom has a series of self-directed workshops on a variety of topics for small business owners.
  • Publication 4591
    Small Business Federal Tax Responsibilities


Small Business: Self-Employed

Small Business: Self-Employed Topics


IRS Resources

IRS: A-Z Index for Business

A-Z Business Topics



IRS: BUSINESS TYPES

A-Z Business Topics By Subject



LEGAL FORMS: CORPORATION

Do It Yourself Corporation

Do It Yourself Corporation Forms and Packages listed below make it easier... up-to-date, high quality forms approved and adopted for use in all relevant courts. You may also obtain information on filing and serving the documents when necessary. There's no waiting--forms are available for instant downloading.

Select the appropriate form for your State. View free previews. Download in Word format.

Corporation - Forms and Packages

Corporation Professional

Corporate Contracts

Corporate Incorporation

Corporate Stock Certificates

Corporate Records Maintenance Package

Corporate Dissolution

Corporate Resolutions

Corporate Stock Options

LLC Formation

LLC Dissolve

LLC Operating Agreement

LLC Professional

Sale of a Business Package

Partnership Forms

General Partnership Package

Pre-Incorporation Agreement

Incorporation Packages



LEGAL FORMS: LLC

Limited liability companies, LLCs, combine the personal liability protection of a corporation with the tax benefits and simplicity of a partnership. And, LLCs are more flexible and generally require less paperwork than corporations.

Do It Yourself LLC

Do It Yourself LLC Forms and Packages listed below make it easier... up-to-date, high quality forms approved and adopted for use in all relevant courts. You may also obtain information on filing and serving the documents when necessary. There's no waiting--forms are available for instant downloading.

Select the appropriate form for your State. View free previews. Download in Word format.

LLC - Forms and Packages

LLC Formation

LLC Dissolve

LLC Operating Agreement

LLC Professional



RELATED LINKS

Business.gov - Official Business Link to the U.S. Government

The Doing Business Law Library - The largest free online collection of business laws and regulations.

Alibaba.com - China Suppliers & Manufacturers Directory.

BusinessInsurance.org - An Informative Guide to Small Business.

Onlinemba.com - An MBA Student’s Guide to Entrepreneurship
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Old 04-21-2008, 12:50 PM   #2
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Default Re: Starting a business

Thanks for the helpful intro links!
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Old 03-03-2014, 07:08 AM   #3
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Default Re: Starting a business

Necessary steps to start a business in the U.S - Research and plan business well so that it will be successful. Determine the legal structure of business - decide whether it is a form of sole proprietorship, partnership, LLC, or corporation, etc. Register a business name ("Doing Business As") with the county recording office. Register business name with state government. Get a Tax Identification Number (TIN) from IRS and open a business bank account. Look for a business location that suits needs and secure a lease. Register for state and local taxes. Obtain business licenses and permits. Learn more about Employer Responsibilities, requirements, worker compensation and unemployment insurance programs, etc.
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Old 09-24-2014, 04:05 AM   #4
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Thumbs up Re: Starting a business

Thanks for the info. As an entrepreneur myself, I do believe in doing extensive research before anyone decides to dive into business. Knowing the ins and outs of it all - from complying with state or city laws on business to setting it up, hiring the right people, adopting the right technology and managing it - will help an aspiring entrepreneur in achieving those business goals.

I read the business articles and resources for start-ups and entrepreneurs I found at globalbx.com. It's always helps to stay informed.
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Old 11-26-2019, 02:44 AM   #5
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Default Re: Starting a business

If you are confident that you have a solid idea or a product then you definitely should read articles, blogs about startups or even conduct market research or online surveys to find your target audience. You should also meet entrepreneurs in your vicinity and take their advice so that you can avoid the mistakes or pitfalls that you could have faced on your journey to start your own business. Then you should find a sponsor for your product. You will have to pitch your idea to many potential investors before you find the right one. Then you could consult a legal representative for a consultation. There are many firms available that also offer free consultation.
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