Tips for entrepreneurs: Develop a business plan and choose an entity

Starting a business is an exciting and potentially profitable endeavor. Entrepreneurs in the process of forming a business are wise to put together a business plan and choose an entity to protect their interests.

Putting together a business plan

A business plan can follow a variety of formats, but the purpose is to provide an overview of the business. It often serves well to begin the plan with an executive summary. This portion of the plan describes the business and its goals. Next, discuss the marketing and financial plans for the business. For the marketing portion, describe the services or products provided by the business, the targeted market and any promotion plans. The financial segment should explain the source and amount of initial equity and how revenue is or will be generated. It should also include an operating budget for the first year. Also include an operations plan. This provides details on the daily workings of the business as well as personnel procedures, insurance information, equipment used to produce the goods or services and delivery methods.

End the plan with a concluding statement that summaries the overall goals and objectives. As noted in a recent article by Forbes, it is also helpful to include an Appendix with financial projections, balance sheets, cash flow statements and any pertinent patent information or customer lists.

Choosing an entity

Three business entity options available to entrepreneurs when incorporating a business are the sole proprietorship, limited liability company (LLC) or corporation. A sole proprietorship is arguably the easiest. Essentially, the owner simply needs to start a business. However, this entity does not offer much in the form of protection to the owner. A key difference between a sole proprietorship and both the LLC and corporation structures is the fact that LLCs and corporations offer additional protection to business owner’s personal assets. LLCs are taxed once since the IRS treats them as a “pass-through” entity. This means the taxes are passed directly to the owners and can be claimed on the owner’s personal taxes. Corporations are taxed twice, once at the owner level and again at the entity level. Corporations also have more paperwork, holding regular meetings and filing corporate minutes. However, it may be easier to receive certain types of funding by incorporating as a corporation.

Legal counsel can help

Determining the best structure to meet your business needs can be a difficult process. These are just a few of the basic considerations to review when making this determination. As a result, those considering moving forward with a business venture are wise to seek the counsel of an experienced business law attorney to help guide them through the process and better ensure their business interests are protected.

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