Starting a business is an exciting endeavor. You may have already thought about a name for your business or even purchased the domain name for your website. However, before you start spending money on marketing materials, web design and office space, you should take a step back and consider all the aspects of starting a new company.
While there are several key steps to follow, every business has its own unique needs and may require additional steps along the way. If you’re planning to start your own business, here are some simple and practical steps that you can follow:
1. Decide what kind of business you want to start.
Before you can start a business, you need to decide what kind of business you want to build. There are many different business structures to choose from including: sole proprietorship, partnership, limited liability company (LLC), and corporation. Each business structure has its own pros and cons. Explore a brief overview of each business structure below:
Sole Proprietorship
Advantages of a sole proprietorship include ease of formation, ownership, and control. In addition, operating costs are minimal, and all profits go to the owner. A sole proprietor also has complete control over all decisions. However, the owner is personally liable for all financial obligations and debts of the business.
Partnership
A partnership is similar to a sole proprietorship except that there are multiple owners involved in the business. Like a sole proprietor, the partners have complete control over the company and share in the profits and losses of the business. The personal assets of each partner are at risk if the company cannot pay its debts or other obligations.
Limited Liability Company (LLC)
An LLC combines aspects of partnership and corporate structures. It protects entrepreneurs from personal liability for business debts or claims while allowing them freedom in structuring internal ownership and management. Members may include individuals, partnerships, corporations or other LLCs.
Corporations
Corporations are similar to sole proprietorships as they have many of the same rights and responsibilities. Corporations have limited liability where the shareholders are not personally responsible for any money that the company may owe. In addition, a corporation can be created by one individual or a group of individuals with common or uncommon interests. Most large companies operate under a corporation structure to protect assets and minimize potential damages.
