What you should consider choosing a business…….You have to appreciate the fact that there are various forms of business organizations that exist in the environment. Again, business is a profit-seeking enterprise established for the purpose of creating goods and services that meet the needs of mankind. Business plays a major role in the lives of every individual as well as a nation. Business activities are undertaken to improve the financial and the material welfare of the participants. A major group that plays an active role in business within a capitalist economy is the entrepreneur, that is, a person who perceives investment opportunities and takes advantages to exploit them by organizing for the business.
Selecting a form of business ownership is a landmark step in the creation of a venture. Most entrepreneurs however are not trained in the finer points of business law. Consequently, it is imperative that an entrepreneur carefully searches for the types of legal ownership and then consults an attorney (lawyer), and an accountant or both to verify whether the choice addresses their specific needs. One of the main reasons small businesses fail is that they do not seek legal and accounting help at the beginning. Nickels, Mchugh and Mchugh stated that one of the key to success in starting a new business is to understand how to get the resources you need. To stay in business, an entrepreneur may need help from someone with more expertise than he/she has in certain areas, or may help to raise more money to expand. How you form your business can make tremendous difference in your long-term success as an entrepreneur.
Although an entrepreneur may change the form of ownership later, this change can be expensive, time consuming, and complicated. There is no single best form of business ownership. Each form has its own unique set of advantages and disadvantages. The key to choosing the optimum form of ownership is the ability to understand the characteristics of each business entity and how they affect an entrepreneur’s business and personal circumstances.
The following, , are relevant issues the entrepreneur should consider in choice of business or when choosing business:
Tax consideration: In a graduated tax rates, the government’s (that is Local, State and Federal) 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.
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.
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.
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.