Relevant issues entrepreneur should consider in business and the evaluation process -There is no single best form of business. Each form has its own unique set of advantages and disadvantages. The key to choosing the optimum form of business is the ability to understand the characteristics of each business entity and how they affect an entrepreneur’s business and personal circumstances.
Relevant Issues Entrepreneur Should Consider.
The following, are relevant issues the entrepreneur should consider in the evaluation process:
1. Tax consideration
In a graduated tax rates, the country government’s constant modification of the tax code, and the year-to-year fluctuations in a company’s income require an entrepreneur to calculate the firm’s tax liability under each ownership option every year.
2. Liability exposure
Certain forms of ownership offer business owners greater protection from personal liability due to financial problems, faulty products, and a loss of other difficulties. An entrepreneur must evaluate the potential for legal and financial liabilities and decide the extent to which they are willing to assume personal responsibility for their companies’ obligations.
3. Start–up and future capital requirements
The form of ownership can affect an entrepreneur’s ability to raise start-up capital. Also as a business grows, capital requirements increase, and some forms of ownership make it easier to attract outside financing.
4. Management ability
Entrepreneurs must assess their own ability to successfully manage their own companies. Otherwise, they may need to select a form of ownership that allows them to involve people who possess those needed skills or experience in the company.
5. Business goals
The projected size and profitability of a business influences the form of ownership chosen. Business often evolves into a different form of ownership as they grow, but moving from some formats can be complex and expensive. Legislation may change and make current ownership options less attractive.
6. Management succession plans
Entrepreneurs, in selecting a form of business ownership, must look ahead to the day when they will pass their companies on to the next generation or to a buyer. Some forms of business ownership better facilitate this transition. In other cases, when the owner dies –so does the business.
7. Cost of formation
The cost of formation to create business ownership varies from one form to the other. Entrepreneurs must weigh the benefits and the costs of the form they choose
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