How to Operate Your Own Business

There are many different ways to operate your own business.

In a partnership, the business is owned by two or more people. All the partners have an equal responsibility for managing the business and share equally in the profits. If you go this route, it is important that you have a partnership agreement drawn up and signed by all partners. You must also obtain a business li­cense and state and federal employer identification numbers. Keep in mind that partnerships have the highest failure rate of all types of businesses, mainly because partners tend to disagree about responsibilities and daily management problems.

Another way to take ownership of your new business is to form a corporation. A corporation is granted a charter from the state you do business in. The company then makes available shares of stock at a particular price per share. The level of each per­son’s ownership in the company is dependent upon how many shares of stock he or she owns. One person can own all the stock, or there can be many stockholders, as is the case in many large corporations. Stockholders then elect a board of directors, who elect the officers who will run the company. Officers must include at least a president, secretary, and treasurer. It is the directors’ responsibility to carry out all corporate business ac­cording to state regulations.

Forming a corporation offers two basic advantages. First, stock­holders have limited liability for the company. Second, it is of­ten easier to raise needed money for the company by selling shares of stock. But a corporation’s activities are limited to those specifically granted by their state charter, including its geographical area of operation. And unless you form what is called a Subchapter S Corporation, the corporation is subject to more taxes than is a sole proprietorship or partnership.

Because each type of ownership has its advantages and disad­vantages, there are many things to consider. If you need more capital for your business, you might consider taking on a part­ner or a stockholder who can invest money in your company. You could also take on a limited partner or even have stockhold­ers with non-voting stock who have no voice in the management of the company but share in profits. If you need help managing your business, you may seek the services of a small business management consulting firm.

Whatever way you decide to take ownership, talk with an attor­ney, preferably one who specializes in corporate law. An at­torney can advise you on the best ways to set up your business and be properly licensed. He or she will also make sure you comply with all local, state, and federal laws. It will cost some money up front to hire an attorney, but it is well worth the cost for you and your company in the long run.

Filed Under: General How To's


About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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