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Logan.WS / Articles / Starting Your Own Business

Starting Your Own Business

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There are myriad things to consider when starting your own business. First and foremost, which type of business is the best? Partnerships, corporations, and sole proprietorships all have their advantages and disadvantages. What about contracts? From employees to every day business deals, the entrepreneur deals with contracts more often than he or she may realize. When are contracts enforceable? When might a contract not be upheld, and where might one exist where it was not intended to? And, for anyone who is considering lending to a small business, how can you protect yourself and your investment in case business turns sour? All of these are extremely pressing issues that seldom are looked into by those eager to start their own companies. We'll take a look at each, and I'll outline the most important points to consider.

We'll start at the very beginning of any business -- determining which form of business to establish. Sole proprietorships are the most common businesses, as well as the easiest to set up. All of the company's income is considered the personal income of the sole proprietor -- that is, the person running the business. However, if the business incurs debts or fails, any creditor can come after any and all personal property of the business owner. Partnerships are essentially the same as sole proprietorships, but with more than one owner. These are probably the worst forms of business -- each partner is personally responsible for anything done wrong by the other partner, and any personal assets of each partner can be used to satisfy a debt incurred by any one partner in the course of business. There are other forms of partnerships that carry less liability, including limited partnerships, and limited liability partnerships. In a corporation, the individual business owners, or shareholders, are not personally liable for any of the business' debts. However, a corporation's earnings are taxed twice, meaning less money to take home as profit. Also, setting up and maintaining a corporation is complicated, time consuming, and costly. Corporations are held to strict standards, and can face serious penalties if those standards are not met. The forms of corporations that exist are: C-corps, close corporations, and S-corporations. A form of business that blends the benefits of partnerships with the protections of corporations are Limited Liability Companies, or LLCs. LLCs are relatively new, complicated to set up, and do not have well-established laws surrounding them, making them somewhat hard to manage legally.

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