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Setting Up a Corporation

StrategyDriven Entrepreneurship Article
 
If you’re at the point in your business where you are wanting to set up a more formal structure, there are many things to consider and this can be quite a serious business challenge, in terms of deciding which legal entity is going to be best.

After all, one size does not fit all when it comes to corporate structures, particularly when it comes to working with other people, and whilst it might feel more respectable to set yourself up as an s corp or a limited liability partnership, it might be more appropriate and tax efficient to remain as a sole trader that works in partnership with another sole trader – rather than setting up a joint venture together.

In the sense of making your business feel more credible, there are many different options to consider when it comes to your legal status; the main options in the US are;

1. Sole Proprietorship
2. Partnership
3. Business Corporation

In this article, we’re going to look at each of these options and weigh up the pros and cons.

1. Sole Proprietorship

This is the simplest form of business set-up and is the default to most people setting up a business, in that it reflects the fact there is one person owning and controlling the business – meaning they are personally responsible for all liabilities but also benefit from all the profits (in that they don’t legally need to be shared with anyone else).

PROS
A sole proprietorship is very inexpensive to form, easy to dissolve (which means to stop trading), and there are very few formalities other than basic bookkeeping and reporting your earnings to the relevant authorities. This type of business is ideal for people that are selling a service, such as personal training or beauty therapy, though it’s just as relevant for consultants – however, some companies will only do business with other registered corporations.

CONS
The business ceases to exist upon your death, meaning it’s not willable or can continue in perpetuity after you die. You are personally liable for the debt and any legal issues that arise from your business operations. It has less credibility when trying to win business with large companies.

In a nutshell, this is the simplest business to form and operate, as it’s simply an individual using a trade name to operate under – yet, the owner has full liability for the obligations of the business, which, if you consider the possibility of being sued or owing substantial debt can feel much more onerous than if you are a director of a company.

2. Partnership

A partnership is simply an association of two or more components, which include people, corporations, other partnerships, trusts and so on. The parties within the partnership are responsible for the business.

In simple terms, the people enter into a partnership make an agreement to share the profits and losses that result from their activity.

The challenge is that the liability of partners is joint and several, meaning any person can be made to pay the debts of the partnership, irrespective of all other factors. This can make things feel very unfair and risky, as whilst one partner might only receive 10% of the profits they could find themselves liable for 100% of the debt of the partnership.

PROS
It adds a sense of formality to the relationship when multiple stakeholders are working together for a common purpose. It is relatively inexpensive to form. The profits are distributed according to the terms of the partnership, which makes things simple and unambiguous in terms of future profit allocation.

CONS
Each partner is liable for the whole of the partnership’s debt, even if they have a small share of the profit – meaning the risks are very high, particularly if you are going into partnership with a person or company that turns out to not be as trustworthy as you first thought.

There are a number of different partnership structures and this one is something to think carefully about, as whilst you might feel more secure in terms of entering a formal partnership, you really do need to be careful who you “go to bed with” in this sense.

3. Business Corporation

A business corporation is a legal entity in its own right. This his means that unlike a partnership and sole proprietorship it is a separate entity that is governed in accordance with laws set out by the state.

In broad terms, there are two types of corporations; for profit and not-for-profit.

The majority of businesses are ‘for profit’ in the sense that they aim to conduct activity that derives a profit, and from that profit, dividends are paid to shareholders depending on their allocation of shares.

There are two types of corporations in the sense of where they have been registered, you can have a domestic corporation that means the company was incorporated under the laws of the United States (specifically, the state in which the corporation was registered), or you can have a foreign corporation, which is a company that has been incorporated under the laws of another country, or state within the US.

A corporation is much more complex than a partnership or sole proprietorship, as a new legal entity is created, that is subsequently regulated by a number of onerous administrative procedures. The benefit to this, however, is that unlike a partnership where things can get a little dicey in terms of liability, if a company incurs a debt, it is the company’s debt rather than the partner’s liability.

The owners of a corporation are called shareholders. The shareholders then elect directors (often themselves) to set the policies of the corporation. The directors then appoint officers of the corporation to manage the day to day operations.

In reality, you could be a shareholder, director, and officer of the company – but the key point to focus on here is that corporations are their own legal entity, and as such, you are employed by the corporation (usually) even though you are technically the owner of the business.

In essence, a corporation is separate from its shareholders. This means that a shareholder cannot just take the funds and abscond, unlike a partnership, which offers a lot more legal and financial protection, but can feel inflexible if you are a one person startup or small family business.

PROS
Things are secure and regulated. Everyone knows the score, and things are not ambiguous or open to personal discussion – there are processes and procedures to follow… meaning, all shareholders have security in terms of their interests. It also creates a democracy, in terms of decision making, which some entrepreneurs value whilst others do not.

CONS
There is a significant administrative burden with regard to setting up a corporation and maintaining the records.

StrategyDriven Entrepreneurship Article

Five Key Aspects You May Miss Out When Starting Your Business

StrategyDriven Entrepreneurship ArticleStarting a new business can be simultaneously exciting and terrifying. You have this idea in your head, and now it’s time to make it into reality. But it can be easy to get caught up in the excitement of starting something new and wholly yours that you might neglect some parts of the process. And as the saying goes, “the journey is far more important than the destination.”

Here are five things you may miss out as part of your business endeavor that proves to be essential in the long run:

Make sure you have a detailed and well-researched business plan

This is the foundation of your business idea. Without a business plan, you might as well be grasping in the dark and may even jeopardize the running of your business in the long term. It’s easy to make mistakes when it comes to business plans, and you may miss out on certain things so do your research, and you’ll thank yourself later.

Customers, products or services, operations, sales and marketing strategies, management and competitors – these are the absolute minimum, and when writing up your business plan, you must include all of these key areas. Show that you have done your research and that you did not just run into the business industry with an idea and no plan by including industry trends and market analysis. As well as this, your plan must include a detailed financial flow, from month cash flow to income statements.

That being said, don’t get caught up in the details. This can be common with technology-based start-ups where technical jargon is thrown around, without taking into account the reader. But if you must include such keywords, make sure to include an appendix to increase accessibility. A business plan must be easy to read and understand so lay down your idea and your plans as succinctly as possible. Take into consideration that you may be required to submit a business plan when asking a bank for a loan or applying for business grants to further grow your business. Without strategies set in place, whether this is for sales and marketing or otherwise, you cannot persuade a bank to lend you what you need.

A business plan is not only useful when applying for loans or grants, but also acts as a guide to grow your business. This helps you identify and pursue goals and objectives that lead to the growth of your company and details the steps that will need to be taken to accomplish this.

Invest in reliable security

Whether you are starting an e-commerce or are venturing into opening a physical store, investing in reliable security is one of the most important steps you can take.

This is particularly relevant to data security. Chances are, your business will use electronic systems and these use data to operate. From information regarding your employees to your customers, these are all data.

With such sensitive and confidential data in your company’s system, you must put into place to keep these as secure as possible. Your customers, particularly, are trusting you with their sensitive information, whether these be bank details or home addresses, whenever they buy your product or use your service. When there is a breach in security, it is not only revenue that is at stake but your customer’s trust – and as a result, your company’s reputation. It is important that you invest in reliable security to keep sensitive and confidential data as safe as possible.

Likewise, keeping your home office or store safe is also a priority. There are many security technologies that allow you to monitor the location through real-time updates and notification systems and you can find out more from this website about the options available.

By increasing the security for your business and ensuring your customers know that you take their data protection and safety as a priority, you can increase customer satisfaction and loyalty and increase your business’s reputation.

Check if you are legally allowed to use your business name

Make sure you check if your business name is taken by another company before you start printing this on business cards, social media and other marketing and sales related areas. A simple search can let you know if the name you have chosen for your business is already taken or if you are free to use it. If the name is already trademarked and you have used it, then this can land you in legal trouble.

Don’t forget to set up a business bank account

Combining your personal and business finances leads to confusion – and it can create suspicion if ever your local or state tax bureaus or the IRS start asking questions. You’re far better off keeping personal and business monies separate for those reasons – and certain legal structures require you to do it that way. As a bonus, you’ll appear more professional and credible when writing checks from your business versus your personal account.

Know your competitors

You may think that your new product or service has no competition, is novel and above existing products – you’re wrong. Most often than not, it’s extremely rare to not have any competitors in an increasingly saturated business industry. But this doesn’t have to be a weakness; instead, do your research. Find out who your competitors are and how your business can be better.

How can you differentiate your business from an existing one? By researching your competitors, you can not only find ways on how you can improve your own business but also learn more about your own business as a whole, your customers and their habits.

By constantly improving and adapting to a constantly changing business industry and customer base, you can ensure your business stays on top and beat out competitors when the tides change.
Making your business idea, a reality can be exciting. With these few things in mind, you can ensure that even if the road towards your business goals and objectives is rocky, that you will know exactly where to go for success.

StrategyDriven Entrepreneurship Article

Launching a Business? Here Are 5 Proven Business Models for You to Consider

Do you already have a service in mind, or are you working on entrepreneurial spirit alone? Both are a great starting point from which you can build a lucrative business. But if you want to inspire investors and customers alike, you need a compelling business model that fits well with what you’re offering. Here are five potential models to choose from.

1. Offer personalization.

Tech and the internet have comfortably reassured consumers that they can easily get exactly what they need. Get your business in on the action with personalization. Customized, tailor-made, bespoke, exclusive – these are all words that can attract certain groups.

Essentially, we want options, and it’s even better when the customer feels like they invented that option. From clothing to home goods to software, allowing people to build their own product carries a lot of promise.

2. Join the sharing economy.

Is your business a viable platform that allows people to get together and exchange good and services? From Craigslist to Airbnb to Uber, it’s possible that your new venture will involve taking a step back and allowing the community at large to decide what they want, and who they want to buy it from.

Relative to other models, there’s little investment risk here. Just ensure there’s a real need for your type of platform, and that you have ironed out issues of liability beforehand.

3. Let a buyer name their price.

Before procuring funding from Unsecured Finance Australia, consider a model that makes buyers feel like they’re practically stealing from you; or at least, very satisfied with the deal they got. Known as a reverse auction, this model lets the buyer name their price or budget.

It won’t work for every business, but it could be profitable if you have a great deal of inventory you can let go for cheap, or if your business has a ton of competition.

4. Offer subscriptions.

One model that has absolutely exploded in popularity in the last several years would be subscription-based services. Here, consumers pay a reasonable weekly, monthly, or annual fee to continue doing business with you.

But it’s not all Netflix. This model translates well offline, as we see millions subscribing to receive beauty and personal care items, food, lifestyle goods, and even cars to drive for a limited period of time.

5. Integrate internet and in-store.

The major challenge many physical stores face is competing with online shopping. Fortunately, the “bricks and clicks” business model has helped keep many physical locations in operation.

When you spread your efforts between both bricks and clicks, you’re supplementing your foot traffic with online shoppers. You can allow local consumers to purchase something on your website to be picked up at your store nearby, or simply sell inventory online and ship it in addition to offering it in person.

There are many more models to choose from than the ones presented here. No matter which you choose for your business, bear in mind that your model can become as much a part of the story as the product or service itself. Therefore, you want yours to not only speak to the modern consumer, but the consumer of the future.

StrategyDriven Entrepreneurship Article

Launching Your Business: How To Organize Your Operation


 
When you have a business idea, it’s only natural that you may sit on it for a while. Maybe you’re frightened of failure, or of going after your dreams and not really getting what you want? Don’t worry, you’re not alone. But if you have always wanted to run your own business, and you love the idea of making it work, then you have to jump in with both feet (or head first!). If your mind still isn’t convinced and you feel held back, then you may want to focus on organizing your way there. Because when you have the right plans in place and you really work to keep things organized, launching can seem so much easier. So here’s what you need to do.

1. Find The Right Location

So first of all, you need to think about your location. And finding the right business location really does matter. If you need a manufacturing unit, you’ll want to make sure that you have enough space, and that you’re in the best possible position to create. You may even want to just start small and clear out your garage space for this. Either way, you need the best possible place to work from.

2. Decide Between Managed Or Self-Service

If you’re setting up an office, one thing to keep in mind is where you want to have a serviced space or somewhere that juts your own. Managed offices mean that you have all of the bills and services included, even the cleaning! But if you rent a space yourself, you may need to set up all of the utilities, internet, and look after the place yourself. So it’s worth considering which will work out best for you.


 
3. Setup The Space

Then, you need to set up the space. Again, if you are going with an office, why not think about going with used equipment to get the price down? Even if you need an industrial or manufacturing space, you may be able to go for used equipment to get a better price too. But just be sure that the quality is where you need it to be to get the job done.

4. Invest In Your Machinery

However, if you do want to make sure that you can do the best possible job from the beginning, investing in the right machinery and manufacturing equipment is just so important. From niche specific unites to counting scales to quality control conveyors, make sure you’re happy with what you have. These are the things you need to run your business and create your product, so they have to be right.

5. Stick To Systems

Finally, one thing you may find, is that systems help you out tremendously here. When you’re working on a large scale and you have products to manufacture, or an operation line to set up, things need to run like clockwork. So, it’s going to be in your benefit to get processes that allow your production to be as efficient as possible, and ensure that you have a good quality control check in place. When this is all organized, you should find that launching is so much easier.

StrategyDriven Entrepreneurship Article

5 Problems Construction Businesses Will Inevitably Face


 
Of all the business sectors in the world, none are quite so tangible as construction. If you open a construction business, then your everyday life will be governed by a very physical reality. Unlike many modern businesses, which involve moving words and numbers on computers, construction is something that you can reach out and touch – and it’s inherently rewarding as a result.

Unfortunately, the many, benefits of working in construction are often somewhat weighed down by non-tangible, metaphysical problems. Thankfully, there are ways and means of navigating these issues, but you do need to be aware of the almost-inevitability that you will experience them. This is due to the fact that construction business owners may produce work that is inherently physical, but they will face a number of threats that are far less concrete – and it will be your job to navigate each of these situations when they occur.

So, without further ado, let’s examine the theoretical problems that your very practical construction business will inevitably experience at some point.

1) High employee turnover

Unfortunately, the construction industry is infamous for the high rate of employee turnover it tends to produce. There is no single reason for this high turnover rate, but it is a simple fact of life for construction businesses.

It would be wonderful to suggest that there are incredible solutions to ensure your business does not experience high turnover but, in truth, this would be misleading. There are, of course, things you can do to help reduce employee turnover, but these measures alone are unlikely to be sufficient. Instead, it is usually best to opt for a two-pronged approach: improve existing conditions, but also exist in a state of perpetual hiring, continually accepting applications for positions and building a list of potential future employees that you keep on file. Working together, these two measures should allow you to control the problem as best you can, and ensure you always have the staff you need to complete projects.

2) Unsuitable ground conditions

At the beginning of history, construction was incredibly simple: the earth was how it had been for millennia, and construction companies could trust the soundness and cleanliness of the soil. Unfortunately, thousands of years of human habitation has changed that, and modern construction companies will often find themselves facing issues with poor or even contaminated soil.

It is inevitable that, at some point in your time at the helm of a construction company, you will have to deal with problematic soil. Your best option is usually to work with a ground improvement specialist such as those at the Helitech Civil Construction Division and similar companies; these experts have a variety of techniques that can mean even the most difficult of soil can eventually be used for construction. While hiring a subcontractor for this work will lengthen the process somewhat, it can make possible building on soil you would usually dismiss, which opens up your possibilities for future development.

In anticipation of this inevitable issue, it may be worth fostering a relationship with a ground and soil improvement specialist from the start of your business. This ensures that when you inevitably encounter difficult ground conditions, you know exactly where to turn for the expert assistance that can allow you to continue a project as quickly and efficiently as possible.

3) Public discontent

The longer your business is in operation, the higher your chances of working on a project that draws the ire of the public. We have all seen activists demonstrating against the construction of a new building or shopping mall, and it is inevitable that your company will at some point be involved in a project that activists dislike.

In terms of managing this issue, realistically, there’s very little that is within your control. The best bet is to always work on projects that have full authorization and that have passed impact studies with flying colors, and it may also be worth checking social media to see if there is planned opposition to a construction project prior to agreeing to undertake the work.

However, even with these precautions, you may well find that you still find yourself working on a site that is subject to demonstrations. If (or when) this happens, your best plan of action is to leave the matter to the police. Engaging with activists will rarely end well, even if you’re in the right, so advise your employees to refuse to enter into conversations and seek appropriate help from the authorities.

Alternatively, if you suspect that fightback against a project you were intending to work on has become so fierce it will negatively impact your company, then you may want to consider withdrawal. The penalties for doing this will depend on your contract, but it’s worth examining this possibility, especially if you suspect the activists may well have a point – the negative publicity from continuing to work on the project could greatly outweigh the penalties you will face for walking away.

4) Workplace accidents

Construction is an inherently dangerous industry. From people working at height to the movement of heavy plant machinery, the risk of accidents is ever-present – and to an extent, this is something that you will need to accept.

However, accepting that accidents can happen does not mean that you are completely powerless in the situation. You do have an element of control when it comes to reducing and mitigating the risks involved in the industry, and examining your options in this regard can help to ensure your business – and your workers – are fully protected at all times.

First and foremost, prioritizing safety at all times is a must for construction companies. It’s important you trust that workers understand the risks of what they are doing, and that their health and safety awareness and training is also up-to-date. Regular meetings to refresh guidelines is a good way to do this, and helps to ensure that even the most experienced of workers is always aware of the risks of their occupation.

Secondly, it’s worth going above and beyond to ensure that your working practices align with regulatory requirements. Unfortunately, many business owners of all types tend to see health and safety rules as something of a bind, and will satisfy the minimum requirement and then move on. However, it’s worth noting that these rules are there for a reason, and if you seek to adhere to them, the chances are you will have a much safer working environment as a result. Ideally, you should seek to exceed the basic regulatory requirements, and also continually check back to ensure these are being adhered to by workers at all times.

Finally, there is an additional health and safety component that is often overlooked by construction business owners: stress. The more stressed your workers are, the more likely they are to experience an accident – and even the very best health and safety practices cannot help in this regard. It is therefore well worth considering implementing measures that are designed to keep workplace stress at a minimum. This should ideally involve a dual approach of managing stress on-site and also learning to identify the signs of stress in an employee.

5) Theft

Finally, theft is a constant threat in the construction industry. This is largely due to the nature of the work; sites are often left unattended for hours or even days at a time, and contain expensive equipment that is an all-too-tempting target for thieves.

Controlling this problem primarily involves ensuring site security at all times, but this alone is unlikely to fully solve the problem. As we have already discovered, a double-approach is often best, and the same applies to the theft issue: you should seek to protect your site, but also ensure you are fully insured for any losses that you do experience.

Unfortunately, obtaining insurance as a construction company is often easier said than done, and premiums can be incredibly expensive. In an effort to keep costs down, work with a broker to ensure you are only insured as far as you need to be – avoid comprehensive, catch-all policies that may provide coverage for instances that are irrelevant to your business. By ensuring you find the right policy for your company, the cost of the premium should be justified, and you’ll enjoy the peace of mind of knowing that your valuable equipment is protected if your on-site security measures fail.

In conclusion

The issue presented above can be uniquely challenging to a construction business, due in no small part to their constancy and their changeability. This can be difficult for construction business owners to cope with, as so much of their prior working life has focused on physical problems with absolute physical answers. Learning to adapt to more theoretical and conceptual challenges can be far more difficult – but it is, ultimately, well worth doing. Construction is a thriving, essential sector, and if you believe you can navigate the inevitability of the problems as mentioned above, it could be the perfect choice for your entrepreneurial ambition.