Thank you for your e-mail regarding starting a business and developing your business plan. Prior to developing your business plan, there are many factors you must consider. Starting a business requires a lot of money and you must take a risk by supplying enough money to launch your business. Entrepreneurs often fail because they do not have enough money to continue to fund his or her business. You must decide on a sole proprietor, partnership, or corporation. All three of these have advantages and disadvantages.
Advantages are that a sole proprietorship is the least expensive in starting a business and the sole proprietor owns, manages, and is responsible for all business transactions of the business. There are no corporate tax payments and a sole proprietor must include taxes for the business with personal taxes. Disadvantages are that the sole proprietor will be personally liable for all debts and obligations of the business. All business decisions will fall on the sole proprietor and investors will not invest in sole proprietors.
Partnerships are when two or more individuals enter into a business agreement and both equally share all financial obligations. An advantage to this is that both can fund the business and offer skills that may be necessary for the business. Because both parties equally share all business obligations, responsibilities, and profits, there can be disagreements. This can lead to the failure of the business if you do not have an agreement in place prior to the start of the business.
An advantage of a corporation is that it is a stand-alone entity that does not hold you responsible for assets or debts of the business. It also separates taxes from personal tax liabilities. The business owner will be responsible for paying taxes on the money the corporation pays you in the form of a salary, commission or dividends. Disadvantages of a corporation is they can are expensive to form, they pay double taxes and...