The Importance of Business Planning
July 28, 2023
If you already own a business or are considering starting one soon, you are likely exploring strategies to ensure your venture can maintain profitability and staying power. As one of your most valuable assets, any successful proprietorship will require a significant investment of both time and money. A comprehensive business plan is imperative when forming an entity that fosters rapid growth and protects against losses and threats, including lawsuits, termination, tax minimization, and challenging partners and employees. Selecting a suitable business entity is a key component in building a solid foundation.
Sole Proprietorship: For those self-employed individuals who conduct their business on an informal basis, sole propriety may be a suitable option. This is the simplest form of business ownership, as there is no legal distinction between the owner and the business which allows for complete control and responsibility for all profits, losses, and debts.
Partnership: When two or more parties agree to work together either formally or informally, this is called a Partnership. There are General Partnerships, in which all parties share profits, losses and liability. Whereas Limited Partnerships permit one or more of the partners to contribute to capital, share in profit or loss, without playing an active role in business operations. Partnerships can be beneficial for several reasons. They allow for the pooling of resources, skills, and expertise, which can lead to higher profits and offer management flexibility.
Corporation: A popular choice for larger organizations is the corporate business entity. A corporation is owned by its shareholders and operated by a board of directors. Corporations are separate legal entities from their owners, which means the corporation can engage in lawsuits, contracts, and own property in its own name. Shareholders hold no personal liability for the debts and obligations of the corporation. They offer significant advantages, including access to capital, limited liability protection for shareholders, and a clear management structure. In order to raise larger capital to finance operations and expansion, corporations can issue stocks or bonds to raise capital, which can then be marketed to investors.
Limited Liability Company: An LLC combines the liability protection of a corporation while maintaining the flexibility and tax benefits of a Partnership. In an LLC, the owners, known as members are not personally liable for the debts and obligations of the business. This means that their personal assets are generally protected from any of the company’s creditors. LLCs are a popular choice for small businesses and startups because they are relatively simple to set up and maintain, and provide the benefits of liability protection without the formalities and administrative burdens of a corporation.
Selecting a business entity can be confusing and stressful as there are several caveats to consider. Seeking the advice of a qualified Estate Planning attorney who can offer guidance and clarity for any important decisions regarding your business(es). Reach out to our office to schedule an appointment to discuss your business and/or personal financial plans. We have two office locations: Salix, PA and Charleroi, PA, serving clients around the Johnstown and Pittsburgh area, as well as throughout the state. Visit our website at www.mckelveylawoffices.com for additional information regarding your appointment. We specialize in estate planning and cannot wait to discuss your plan with you!