One of the earliest decisions you’ll have to make as a new
entrepreneur is the legal one of deciding whether you want your business to be
a sole proprietorship, partnership, or corporation.
If you are going to take the family
lawn and go into the grass-cutting business, you don’t have to do anything. The
mere act of getting paid for looking after your neighbor’s grass makes you a Sole proprietor. The advantage is that
you are your own boss, and if the business turns into another General Motors,
you own it all. The disadvantage is that you are all on your own (O.Y.O). You
don’t have any partners to help capitalize the venture, scheme and plot with
you about it, help you turn it into a success, and be right there beside you in
good and bad times. As a sole proprietor you are also personally liable for all
debts, and if you cut off a customer’s big toe while trimming his greenery, you
can get sued for everything you’ve got.
As a sole proprietor you can do
business under your own name (For Instance, Jonathan Services), but if you want
to use an assumed name, such as Unbeatable Service, you’ll have to file a
‘’doing business’’ certificate with the appropriate authorities in your
country.
If you feel you’d like someone to share the
load with you in starting up a business, you think about a Partnership. Under this arrangement, you and your partners are
personally liable for the firm’s debts or for judgments if it is sued, but the
responsibility for actually running the business can be divided anyway the
partners wish. It’s asking for trouble if you don’t have a signed contract with
your partners, one that spells out everything you’ve agreed on, from who puts
how much in the venture, to who does what, to how the profits and losses will
be divided .
If you are still not at ease with the
unlimited-liability (Unlimited liability means that your liability is not
limited to what you put into the business, it could affect your personal
effects in case of a big loss) associated with sole proprietorship or general
partnership, then you have an opportunity of incorporating. You could try protecting yourself by purchasing a
liability insurance policy to reimburse you if you are held financially
responsible for your business’s transgressions-but not its unpaid bills. You
might even be able to get a general partnership to invite you in as a silent
limited partner, which protects you against everything but losing your investment.
But the safest way to avoid being
impoverished by your business going belly-up is to incorporate. This way if things turn sour, all you lose is what
you’ve sunk into the business. You home, car, and other personal assets cannot
be touched by your company’s creditors, or by those who hold judgment against
you. One way your private property can be seized is if you’ve agreed to be
personally liable for your company’s debts, something most banks will insist
upon if you are just starting in business and ask for a loan.
As you get closer to starting a business of your own, the fear of being
isolated and lonely may begin worrying you, as it has so many others. A good
way to quickly allay this fear is to join a support group of other business
people in your community where you can find people of like minds. Such
association will help in no small measure in getting you through this cradle
stage of your business.
No comments:
Post a Comment