Business 101: What To Consider Before Finalizing Your Business Plan
After completing a rough draft of your business plan, it’s important to look over the material and to make sure that it falls in line with your business concept. This keeps the business aligned with your personal values and determines the type of corporate structure necessary for success.
Your Business Concept
The Business Dictionary defines a business concept as, “An idea for a business that includes basic information such as the service or product, the target demographic, and a unique selling proposition that gives a company an advantage over competitors.”
Your business concept will help to lead your business plan and define the direction of your corporate structure. This is one of the most concrete portions of your business plan. It will ultimately help to dictate your product and the nature of your future products.
Choosing Your Corporate Structure
Your corporate structure is going to be based on the size and intention of your business. Looking at your business plan can help you to predict the type of structure that you’re going to require at various intervals within the life of your company.
It’s very important to choose the appropriate structure, as this can impact your taxation and ability to employ other people. When starting a business, you want to make sure that you stay within the legal parameters dictated by your state and your industry. Falling outside of these parameters can lead to legal issues, problems with the IRS, and the need for a sample hardship letter to combat financial ruin.
It can help to go and speak to an attorney about exactly what needs done to ensure your company’s legal success.
There are four main types of corporate structures to choose from:
- The Sole Proprietorship is the simplest of these corporate structures. This is only appropriate when you will be the only employee and responsible party for your business. You will be absorbing all responsibility and legal consequences of anything that happens within the parameters of your business.
- Partnerships allow you to divide the financial and legal responsibility of the business between yourself and other partners. There are varying degrees of partners, and their responsibilities will need to be detailed in very specific contracts. You’ll need to understand the tax implications.
- Corporations are generally the preferred structure for larger businesses. This separates the business owners from the business itself. The business becomes its own tax entity and takes on many of its own legal responsibilities. This can result in higher tax payments, or several complicated procedures that need to be completed every year. Corporations often have the most maneuverability when it comes to employment and growth.
- Limited Liability Corporations and S Corporations are really a mixture between partnerships and corporations. They spread out the liability and the responsibility for the business and its taxes. An S corporation focuses primarily on shareholders within the business. These can be silent partners or people who invest and hold a portion of the business. Making it Legal
After you’ve worked out the initial details, it’s time to file the paperwork with your state to finalize your corporate structure and to officially create your company. This can be both exciting and intimidating. Going further will involve the application of your financial plan and hard work.