TYPES of ENTREPRENEURS
One of the most important decisions any business owner will face when starting a new business is deciding on what structure the business will take.
Types of Business Organization
Some of the factors which will assist you in making that decision include.
*Your needs for capital.
*The number of people you expect to hire.
*How you plan to distribute earnings.
*Any liabilities you are assuming.
*How long you are planning to operate your business.
*Any legal restrictions.
There are three main types of business organizations:
1.Sole Proprietorship
2.Partnership
3.Corporation
Sole Proprietorship
*The least expensive and easiest way to start your business
*An individual on his/her own account carries out the business or profession.
*No formal procedure is required for setting up a sole proprietary concern.
*Registration & local licences
Partnership
1.Business relationship agreement between two or more persons
2.The capital for a partnership is provided by the partners
3.Partnerships (other than banking companies) are generally limited in size to
twenty partners.
4.The interest of a partner is transferable only with the prior consent of the
other partner (s).
5.Generally they are formed to pool resources.
Partnership
The two most common types of partnerships are
*limited partnerships and
*general partnerships.
Two or more people can form a general partnership through a simple verbal agreement
(Not recommended)
Partnership agreement:
1.The compensation for partners.
2.How long will the partnership last.
3.How will the profits/losses be divided?
4.What type of business is it?
5.What is each partner investing into the business?
6.If the partnership dissolves how will assets be distributed?
7.A settlement clause for disputes.
8.Provisions for dissolution of the partnership.
9.Provisions for future changes to the partnership.
10.Define any restrictions to expenditures or authority.
11.Provisions for death or incapacity.
Corporation:
1.A corporation is a legal entity that has most of the rights and duties of a
natural person but with perpetual life and limited liability.
2.Corporations can raise capital
3.Shareholders of a corporation appoint a board of directors and the board of
directors appoints the officers for the corporation,
4.who have the authority to manage the day-to-day operations of the corporation.
5.Share holders are generally liable for the amount of their investment in
corporate stock.
6.Their personal property is immune from claims against the corporation-thus, their
liability is limited.
7.A corporation pays its own taxes and shareholders pay tax on their dividends.
8.The corporation is its own legal entity and can survive the death of its
owners and shareholders.
9.Corporations hold annual meetings and require directors to observe certain
formalities.
10.They are more expensive and complicated to form and require periodic filings
with the state and also require annual fees.
11.Corporate control lies with the person who has ownership of the most
shares of stock.
12.If a single stockholder or a group of stockholders own at least 51% of the stock
they can make decisions of policy.
13.The size of the corporation will affect how formally or informally it can
operate.
14.Smaller corporations might operate less formally, but still need to keep
proper documentation.
