Home | Business
If you are just getting your business off the ground, one of the more key issues will be your choice of a legal structure. If you aren't going to incorporate your business, you can choose between a sole proprietorship or a partnership. Which one is right for you will depend on your financial situation and how much freedom you want to have. 1. Sole Proprietorship There are many advantages to owning your own proprietorship. Here are just a few: - Takes only one person to run - Simplest and least expensive business to form - Few legal restrictions - All profits (and losses) go to you - Controlling decisions made by you However, there are also many disadvantages to owning your own proprietorship. Listed below are some of the more common ones: - Unlimited liability (may exceed your investment) - Heavy responsibility - Your knowledge alone drives the company forward - Limited growth potential 2. Partnerships Another legal basis for starting a business is the partnership. Keep in mind that partnerships can be between more than two people. Often partners have different skills, or one parner is financially supporting the business while the others do all the work. Advantages - Quick and easy to form - Shared responsibility - Capital can be raised faster Disadvantages - Again, unlimited liability - If the business goes down the tubes, so might your friendship - More complicated about what to do when one or more partners wants to stop being a part of the business 3. Breaking Up Is Hard To Do When a partnership ends, it can often be a source of great dispute between the partners. It is highly recommended that you use a shotgun clause. A shotgun clause is where, in the event that one of the two partners decides he wants to get out of the agreement, he can allow the other partner to offer an amount of money to buy out his half of the company. The clause then goes on to state that the partner can then fire right back at the other partner and buy out their half for the same amount. In other words, imagine two kids fighting over a pie. You tell the kids that either one of them can cut the pie into two pieces, but then the other kid gets to choose what piece he wants first. This ensures that if your business partner offers you a dollar for your half of the business, you can fire right back at him and buy his half out for a dollar. This ensures you get a reasonably fair price for your half of the business.
Information and Articles: http://www.mastersmba.com
Providing Information on various topics, please browse our other Articles for more informative resources, we house information on every topic imaginable so regardless of your needs you can be assured to find the answer here. If you wish to reprint this on your own website, simply click the "Web Version" in the right menu, and you are presented with a pre-formatted document to use.
A lot of the information is written by the Master Article team, and published exclusively on the MastersMBA.com website, and we do our best to research all information to ensure it's as accurate as possible. However at times we also publish documents given to us by other sources, we do examine these documents to ensure they are as accurate and correct as possible however at times they discuss highly specialized fields making it hard to authenticate the validity of every fact in the document. These are written by specialists in their respective fields, and we do trust their integrity and judgment however it's always a good idea when doing any research to consult a number of sources and form your own conclusion based on a number of view points.
