by Chuck Moyer

Created on: January 15, 2008

Are you ready to go on it your own? Do you have that idea for a business you think is a winner? Before you jump in, there are many things to plan out. What form of ownership your company takes is an early and important one. Ownership structure influences how risk, succession, and taxes are handled in your business. And can influence the choices and legal requirements in the future of your entrepreneurial endeavor.

Even with the importance of these decisions, you are not forever locked to the initial structure if your business outgrows the benefits of that structure. But, careful considerations will help make the right decision for you in the near term and benefit the critical early phase and growth of your business. Most small businesses start out as a Sole Proprietor type.

In a sole proprietorship the business and you, the individual owner, are one and the same. This structure works for small businesses where the assets, liabilities and risk are controlled by one person. A business with no, or very few employees, where the day to day operation of the business is performed by the owner as in a small retail shop are typical of this ownership structure. It is also the easiest to setup and the least expensive in terms of reporting and tax requirements as profits and losses are the benefit and burden of the individual and are reflected on their individual tax return.

In must be considered in light of the sameness of the business and the owner, under sole proprietorship, all your personal assets - house, car, savings, other investments as owner, are at risk under the unlimited liability nature of this ownership structure. Additionally if your business needs to raise funds at levels higher than the collateral provided by your personal assets, you may not be able to secure those funds through traditional financial solutions.

Truly small businesses with limited participation of other individuals, manageable asset inventories, simple tax implications, no plan for succession beyond the life of the owner and a low vulnerability to lawsuits can make a serious consideration of filing as a sole proprietorship. If any of these elements do not match your business plan consideration of the other available structures is warranted.

Keep in mind that even under sole proprietorship you can operate your business as a alias or fictitious name, but check with you state government to determine what forms or registrations are needed to officially identify and launch your business. A great place to start is the Small Business Administration web site at www.sba.gov , which will provide information and assistance to make your business venture a success.

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