Part 1: Legal Classifications of Business Ownership
There are 3 Major types of business ownership. They are sole proprietorship, partnership, the corporation.
· The sole proprietorship is a business entity that involves a single or sole owner of an unincorporated business. The owner receives all profits and has unlimited responsibility for all losses and debts. All assets and debts belong to the proprietor's.
· The partnership is a business arranged between two or more parties to advance their mutual interests, or co-ownership for profit. It is not a corporation or a separate entity.
· The corporation is created under the laws of a state as a separate legal entity that have privileges and liabilities that are distinct from those of its members. There are many types of corporations. Early corporations established by charter. In today's contemporary feature corporation have limited liability. If a corporation fails the shareholders may lose their investments, employees lose their jobs, but neither are liable for debts to the corporation creditors.
Pros and Cons of Business Types
The pros of having a sole proprietorship is you don't have to do alot of paperwork or forms to fill out. The only things you have to do is file with you local city or county clerk's office. You control all the money you make in the business. You make business operation decisions. You are your own manager by responding quickly to day to day changes and decisions. You don't have to worry about government control over regulations, expenses and taxation. You don't have to do separate tax return for the business and you don't have to do a balance sheet.
The cons of a sole proprietorship is that you will responsible for all debts and obligations. Liability costs cover all assets and additional insurance may be needed to cover personal injury or loss. The business can be terminated in the event of the owner's death or failing medical or mental health. It is difficult to raise operating money or long-term financing with fewer assets. All the decision making rests on one individual. Sole proprietorship have less professional ethic than a partnership and lesser than a corporation. (Schreter)
The pros of a partnership business expenses when setting up are kept to a minimum and legal documentation is require to start a partnership. It's more straightforward and less complicated than a corporation. Partners have motivation and directly share in profits. It's easier to attract capital than a sole proprietor. It's easier to make decision than in a corporation, but more complex than a sole proprietor. You have more freedom from Federal regulations and taxation.
The cons of a partnership is that the partners must assume all business risks and purchases insurance to protect the business from any disaster. If a partner quits or passes on in death the partnership will dissolve unless it will operate under survivorship and create a new partnership. This is where partnership insurance should be considered. Long-term capital is hard to obtain. Partnership collateral makes it easier than sole proprietorship. All partners are held liable for partnership business activities and commitments of the partner. Buying out a partner is a difficult process unless an agreement is made at the beginning of partnership contract.
The pros of a corporation have owner protection legal liability for the corporation activities and debts. Legally the corporation is a separate entity. By maintaining this limited liability the owner must follow a number of legal corporate formalities. The corporation has the ability to attract investors. The stock has a strong selling point to investors willing to invest capital in the business venture. The corporation has a power structure made up of directors, officers, and shareholders. Each group has their roles to act in the company and their responsibilities within the corporate structure. There are stock options for the employees. This offer an appealing opportunity of stock benefits for employees to lock-in their price on the company stock.
The cons of a corporation is the expensive time and cost involved. A number of documents need to be prepared that include new articles and by-laws and filing fees paid to the Secretary of State's office or other business filing agency. The corporation must follow formalities which is required by law, to be sure it operates as a separate entity and independent of the business owners. This means directors hold meetings, recordkeeping of corporate activities, and maintain corporation continuing financial independence. The potential tax liability may cause the corporation to be "double taxed." The corporation is taxed for any profits earned. Individual stockholders earned profits from the corporation are also taxed. This happens in larger corporations and not issued for stockholders or owners of smaller corporations that work for the business itself and are paid salaries rather than dividends. A solution to the double taxation is for the corporation to file for S-corporation tax status.
Business Research: Steps & Costs Resources
The state I live in is the most difficult but not impossible area to set up a graphic design business. The area of demographics are very limited. Jobs in the area are those in the field of health and medicine, food service, coal and gas industry, chemical and metal plants, natural resources, business, transportation, and computer services. The area is growing but at a slow rate. The city Morgantown is the second in the nation in job growth. West Virginia is expect to post modest job growth for 2012. The West Virginia Small Business Development Center is the only business that is a division of the West Virginia Development Office and funded by the State of West Virginia, the United States Small Business Administration, Community Colleges, and Workforce Investment Board Partners. They provide assistance to emerging entrepreneurs and existing small businesses. They provide many free services, financial help, and coaching.
The WVSBDC helps the entrepreneur find the information they need to start-up a business and keep it growing. Federal statistics have shown that small business fuel the economy in the state of West Virginia. 97% of the companies in the state are small businesses. Their three step jump start gets you started in finding resources that is needed for your small business. They're there to help point you in the right direction. They explain how to reach your goals. The company doesn't offer loans or grants to start up a business. Their next step two, you are required to attend a workshop. You are assigned a business coach. The fundamentals help beginners in the nuts and bolts of starting a business. They help to develop your skills. Step three you get to meet your business coach that will mentor your steps into your business. They do suggest into getting to know yourself by knowing the pros and cons of a business in money management, bookkeeping, inventory control, production planning, advertising, promotion, marketing research, and general management. It's also suggested to evaluate personal and financial considerations that can identify ways you can prepare yourself in a business.
When counting the costs when starting a business. The highest cost would be the rent unless you have your own building to conduct your business then the cost would be property taxes, mortgage (if you owe on your property), and building maintenance. If you have a home business it would be most likely to travel to your client's place of business and this would add the costs of transportation and a vehicle. In a graphic design business an entrepreneur needs to consider the costs of equipment and software to help in design work. (Miller) If you were to make an annual sale of $40,000.00, after expenses the income expenses statement would have average sales, income, and total expenses that would leave a net profit of around $19,000.00. If you would include a SG&A Detail that includes your annual sales with services, supplies, repairs, travel, utilities and other deductions that could total around $11,000. This would leave your final profit at $8,000. (BizStats) The IRS has small business forms and publications for information in filing taxes returns. This should include any tax law changes, tax tips, and more. (IRS)
Companies that offer a service for setting up businesses.
A website called Bizfilings.com helps new entrepreneurs to set up their new business. Their fees start from $97.00 and up. BizFilings takes you through the learning process and guide you through to make sure that it is done right. Most all the set-up companies are about the same it the pricing that can vary. BizFilings you do it in 5 easy steps with a quick name and quality check and documents files and delivered. (Bizfilings.com)
MyUSACorporation.com fees are just $39.00 plus state fees. You can register a Non-profit, LLC, or a Corporation form. They have a wide variety of services and is the top service on the internet. They have live chat and are BBB approved. They are very informative and depending on the state they give full resources to help understand the process of setting up a business in their state. (MyUSACorporation.com)
The best choice for me would be MyUSACorporation.com because of the reasonable and affordable pricing and the complete and comprehensive information and resources that are available on the website. This will probably be the source I would use when starting up an actual business.
Part 2: Are you Ready to Start a Business?
• My inventory of skills is fairly broad and eclectic. They range from administrative office to health information specialist to fine art and graphic design with some skills in food services, insurance, and customer services.
The skills I will need to run a graphic design and creative services business is the knowledge and application of design software programs and office software.
Adobe Creative Suite includes Photoshop, Illustrator, InDesign, Flash, and Dreamweaver. These are the main tools that are going to be used in designing the products. When I look back when I was trained in using software was over ten years ago. Adobe upgrades provide new tools and ways to make the design and creation of graphics and artworks. The only analysis I would make here is the extent of my education and training over the years has made me an old pro in using the software. Except for Flash and Dreamweaver I used in recent years I studied at IADT at Tampa. The early version of began studies in graphic design at Santa Monica College in Santa Monica, California.
I've also learned 3-D software Maya and I've also learned a program called Adobe Premiere Elements that creates and edits videos. I've also had an extensive study in art history, photography, darkroom, airbrush, materials, pre-press, and fine arts. All of this I've either learned in college, continuing education, workshops, seminars, and personal experiences through the years.
Some of the skills that I've learned on other office jobs will help assist me in working my small business.
• My areas of strengths have to be my creative thinking, innovative engineering, talent in drawing, and sticking to a project until it's completed, my passion for art and design, determination, good sense of intuition and initiative, motivation, multi-task, flexible, and having faith.
• The areas that comprise my weaknesses are obstacles or hurdles in Adobe Flash I need to overcome and learn once and for all how it is done and not be so intimidated by it. There are other weaknesses that are on a more personal issue in the way I will be able to become a professional since my age and physical appearance can limit my goals somewhat. I believe that there are some loss ends that need to be filled into the gap and it's never too late to work on those weaknesses to make me more confident. I think my biggest weakness is to overcome procrastination and anxiety, and my plan to overcome these are to one do what I haven't done in my entire life is to give it over to a higher power I call who is real and has the power to make all things possible. I find this verse relevant for anyone who need the answer to solving all problems―Hebrews 13:8.
BizMiner. Free business statistics and financial ratios. BizStats. Web. retrieved January 8, 2012. http://www.bizstats.com/sole-proprietorship-business-financials/arts-entertainment-recreation-16.0000/show
Small Business and Self-Employed Tax Center - Your Small Business Advantage. IRS. Web. http://www.irs.gov/businesses/small/index.html
Miller, Eric. How Can I Start a Design Firm if I Don’t Have Enough Money? About.com. Web. retrieved January 8, 2012. http://graphicdesign.about.com/od/frequentlyaskedquestions/f/low_budget.htm
Schreter, Susan. The Pros and Cons of Sole Proprietorship. Fox Business Small Business Center. March 11, 2011. Web. retrieved January 8, 2012. http://smallbusiness.foxbusiness.com/entrepreneurs/2011/03/11/pros-cons-sole-proprietorship/
Partnership. Reference for Business Encyclopedia of Business, 2nd ed. Web. retrieved January 8, 2012. http://www.referenceforbusiness.com/small/Op-Qu/Partnership.html#ixzz1ixobFNJC
Pros and Cons: Why Form a Corporation? Findlaw. Web. retrieved January 8, 2012. http://smallbusiness.findlaw.com/business-structures/corporations/incorporate-pro-con.html