|
||
 |
Forming a Business Plan
The first step we discuss with our clients is making sure that they have an effective Business plan. Proper business planning means results and success. It is important with any business plan to make sure that it matches your purpose.
What is a business plan?
A business plan is a plan that looks ahead, preparing for problems and focuses on future opportunities. They help pave the way for new loans to the business that are to be made or perhaps new investments. It is important that clients have a clear mission statement as this will be the foundation of your business. Other information in the business plan might include a general outline about the product or service, industry trends, the agents involved and starting finances.
What is important in a business plan?
For many of our clients perhaps the most important business plan is one that focuses and addresses finances. This includes profit and loss, the businesses cash flow, balance sheet,
Some of the suggestions that we give our clients for a business plan include the following points:
- A Mission Statement: This is just a small caption about your business
- Description of the Business: values, culture and initial plans
- Services and products: Focus on giving value to your client/buyers
- Market research: determine some of the needs in your market, where the clients are and how to reach them
- Focus and Strategy: Include in your plan certain steps to take to target your clients. This would also include organizing staff responsibilities and your budget.
- Professionals: include a list of key team players at your company, their strategies and the details on how you will be able to implement market goals.
- Financial management: make sure to include in your plan a balance sheet, profit and loss as well as cash flow.
Business Entities
We strongly advise our clients that before starting any business to do a business plan. Once the idea is written it will be easier to see whether or not the business plan is feasible and whether the client will be better prepared for any roadblocks ahead.
Certain key ideas to think about when developing a business strategy is how is your business different from others, and how will your goods and services appeal to customers? In other words what makes you unique from your competitors? Begin thinking about different ways that businesses differentiate themselves? One might say that they are cost-effective while another might chose to focus on client relationships.
How to form legal entities and launch your company successfully
It is important before forming any business to understand some of the pros and cons about different legal entities. The pros and cons about business entities vary by state to state and consequently should be consulted with an attorney you can trust.
There are many different business entities that a client can choose from. Certain entities range from sole proprietorship, partnership, corporation, or even a Limited Liability Company, LLC. Within entities you have additional choices, between the standard corporation or the small business S corporation.
Sole proprietorship
A sole proprietorship is perhaps the simplest formation. A sole proprietorship is usually under the owners name or could be under a trade name. If it isn’t under your name alone you can always state ”Doing Business As”. There are several disadvantages to a sole proprietorship. One of the main disadvantages is the lack of a separate business entity. This means that the owner of the sole proprietorship has personal responsibility for the business. If the business dissolves then creditors can go after the owner personally. In addition, the taxes with regards to a sole proprietorship could be good or bad depending on company finances. The business income would go on Schedule C of your tax return.
General Partnerships
Partnerships are formed by 2 or more people in a business who earn a profit. Partnerships are generally governed by state laws, but a Uniform Partnership Act has become the law in most states. In a partnership agreement, the income or loss from partnerships pass through to the partners without any partnership tax. In fact, when forming a partnership it is important to create a partnership agreement as that will tend to define different levels of risk such as being a general partner or a limited partners. In addition, it’s important when forming a partnership to look carefully at the agreement. The agreement will explain the arrangements when the partnership dissolves, buy sell agreements as well as what should happen if a partner withdraws.
We advise our clients before forming a general partnership to discuss some of the pros and cons. It is important to find an attorney with experience and has worked with several business entities in the past.
Forming a Corporation
There are two forms of a Corporations which are a C corporation or a S corporation. The C corporation is the most widely business formation throughout the United States. A C corporation provides the best protection from personal liability for owners, and provides the best non-tax benefits to owners. Forming a corporation is a separate legal entity which is different from its owners. In forming a separate entity, the corporation will be responsible for paying its own taxes.
The S corporation is mostly used for smaller corporations. Unlike the C corporation, owners within the S corporation can take profits without first paying the corporation’s tax on these profits. In other terms, profits from the corporation are taxed once for the S owner, and twice for the C owner.
The formation of a C Corporation can be switched to an S but this can be quite rare. The IRS is very strict with regards to these formations. Because of these tax consequences, it is important to work with a CPA and an attorney you trust. Our attorneys work with several top-notch Certified Public Accountants to make sure that the business entity is properly protected and formed.
Limited Liability Company (LLC)
An LLC is very similar to an S corporation and provides significant limitation of legal liability as well as some favorable tax treatments on profits. Forming LLC’s vary from state to state and it is important to trust an attorney with experience to take care of your business needs.
See an experienced attorney
Before taking any steps to form a legal entity make sure you meet with one of our attorneys at 213 290 4933.
