3.06B Select form of business ownership 3.00 Acquire knowledge of business ownership to establish & continue business operations

Objectives Demonstrate procedures for selecting a form of business ownership.

Steps to Choosing Ownership Type 1)Determine the nature of the business a)Can you manage on your own or will you need to hire help? a)If starting small – sole proprietorship b)If you start small you can reorganize later 2)Assess your desired level of independence or control a)If wanting total control - sole proprietorship b)If not comfortable with all decisions & desire input from others – partnerships or hybrids

Steps to Choosing Ownership Type 3)Evaluate financial needs a)If ample financial resources on your own – sole proprietorship b)Need a lot of capital in savings, etc. – partnership, corporation, or hybrid c)Lots of expensive equipment & other costs – corporation so you can sell stock 4)Examine willingness to assume risk a)If you are a risk taker – sole proprietorship or general partnership a)Risking all personal assets b)Not a risk taker – corporation, limited partnership, or hybrid a)Only risking what you invest

Steps to Choosing Ownership Type 5)Analyze your experience & abilities a)Do you have all of the skills & abilities to run the business – sole proprietorship b)Lack a major skill - partnership 6)Implement steps to legalize the business a)Obtain copyright, trademark, or patent for a new idea or product b)Check on any state certification requirements for certain professions a)Ex. CPAs, attorneys, educators, hairstylists

Steps to Legalizing Your Business  Sole Proprietorships  Verify professional certifications  Register your business name by completing a “Doing Business As” (DBA) form with County government  Obtain permits & meet health & safety requirements as mandated by your local government

Steps to Legalizing Your Business  General Partnerships  Determine each partners rights & responsibilities  Best to develop a partnership agreement with an attorney’s help  Limited partnerships must file a partnership agreement  Information in standard partnership agreement includes: Formation date of partnership Names & addresses of all partners Purpose of the business Managerial responsibilities of each partner Allocation of investments, profits, losses, & salaries among partners Duration of partnership Accounting procedures & accessibility to financial records of each partner Conditions which can dissolve the partnership Procedures for dissolving the partnership Procedures & provisions for protecting surviving partners

Steps to Legalizing Your Business  Corporation  Apply for a charter with the N.C. Secretary of State  File an “Articles of Incorporation”  Includes business name, purpose, location, amount of stock to be issued, classes & values of stock, stockholder voting guidelines, names of the board of directors, general powers, limitations, & activities of the business  Pay incorporation fee  Pay attorney & any government fees

Steps to Legalizing Your Business  LLPs & LLCs  More complicated than sole proprietorships & partnerships, but less complicated than corporations  Register in state where located  May have various initial & annual fees  Some states require operating agreement (similar to partnership agreement)  Although not required it is recommended consulting an attorney