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Business Structure
The business structure states who own the company, how its profits circulate, and which managers perform what tasks. It is also essential for tax and legal responsibility purposes, depending on the structure of the business, the business will be taxed differently, and managers and owners will have different levels of responsibility in the event of wrongdoing or a lawsuit.Types Of Business Structure
Sole Proprietorship A sole proprietorship, (sole trader, individual entrepreneurship or proprietorship), is a type of business that is owned and run by one individual. Despite its name, a sole proprietorship doesn’t automatically mean one person works alone as the sole trader can still employ other people. A sole proprietorship is the simplest business structure, it is inexpensive to start, and there are minimal fees incurred when registering a sole proprietorship. Partnership This is a business structure where two or more people in cooperation own the company. The partners share responsibility for managing the company, and for any profits and losses, the business generates. When registering a partnership, there is little official procedure involved, and partnerships enjoy a special taxation arrangement. On the downside, the partners are personally accountable for the debts and obligations of the business, and their personal assets can be sold off to pay the business debts. In addition, disagreements may transpire between the partners and this may slow down the operations of the business or even close the business. Corporation A corporation is a type of business structure that gives the entity a separate legal entity from its owners. It is complex and expensive to set up, and it requires the owners to meet the terms with more tax requirements and regulations. Nevertheless, the entity can raise large amounts of capital by selling shares of stock to the public. In addition, the business structure comes with limited personal liability, offering the owners protection against debts, liabilities, and obligations of the business.Sign up to the Connect Nigeria daily newsletter
Limited Company A limited company is a business structure that recognizes the business as a separate legal entity to its owners. Less paperwork is involved, and the owners enjoy limited liability which protects their assets from being sold to pay liabilities of the entity. On the negative aspect, a limited liability company is costly to set up because it must register with the state where it intends to conduct operations. In addition, the entity may need to hire an accountant and an attorney to ensure that it complies with tax and regulatory requirements.
A Business Plan
A business plan is a written document that explains in detail how a business (usually a startup) defines its objectives and outlines its goals and how the business plans to achieve those goals over the next three or more years. Business plans are important documents used to attract investment before a company has established a proven record of accomplishment. They are also a good way for companies to keep themselves on target going forward. Operating without a business plan is never a good idea, in fact, very few companies are able to last very long without one. There are more benefits to creating and working with a good business plan. Lastly, the business plan lays out the ever-important financial plan, discussing things such as income and cash flow, loans, and obligations. Key elements of a business plan include:- Executive summary and mission statement.
- Projected staffing and equipment needs.
- Short- and long-term marketing strategy.
- Financial statement, including anticipated startup expenses and capitalization.
- Outline of management structure and operational processes.
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