How to Decide What Structure Is Best for Your Business

There are several factors to consider when deciding what structure is best for your business. Although cost and convenience of your business should be a consideration, it is not the major consideration that will affect your business in the long run. The business structure you choose will affect your ability to control the decision-making and management, your liability to third parties, and the taxes you pay personally for your business. It is therefore important to understand the basics about the different business structures and affects of each, when deciding what structure is best for your business.

LIABILITY

Depending on the business structure you decide is best for your business, you can be either "jointly and severally liable," or virtually not liable at all to third parties. Under most circumstances, LLCs and Corporations are liable to third parties, thus freeing the business owner from liability. However, there is an exception where the courts can Pierce the Corporate Veil, which has the affect of passing the liability of the business entity to the individual owner(s). Conversely, Sole Proprietorships and Partnerships hold each owner "jointly and severally liable." This means each owner is individually liable. Creditors and parties that may win suits against the business can collect the full amount from any and all of the owners to the extent the liability is resolved. The owners can then seek recovery from the other owners according to liability agreements among owners and/or fault.

TAXES

Pass-Through Taxation

The type of business structure that you decide is best for your business will affect your tax liability in two ways. Either you will experience "Pass-through Taxation" or "Corporate Taxation" (Double Taxation). In "Pass-through Taxation," the earnings/losses are passed from the business to the business owner, thus giving the affect of only being taxed once, on the business owner's personal taxes. Choosing this business structure can have positive and negative consequences depending on the productivity of the business. If there are losses, those losses are passed to the individual owner, offsetting the tax liability from the owner(s)' personal earnings. However, if there are larger profits, those profits also pass through to the personal tax liability of the individual owner(s). This can propel the owner into a higher tax bracket, thus forcing the owner to pay more taxes, even if the owner is not cashing out the money for personal use. The entities that bring this effect to the business owner are Sole Proprietorships, Partnerships, S-Corporations and sometimes LLCs.

Corporate Taxation (Double Taxation)

Under "Corporate Taxation," earnings are taxed twice. Earnings are taxed at the corporate level, and then at the personal owner level when the earnings are distributed. This is usually less desirable for smaller start-up businesses because it leaves less money to be used either for the business or by the business owner. However, there are some other tax benefits from choosing a business structure that has corporate taxation. The business entities that use this taxation are C-Corporations and sometimes LLCs.

CREATION

The creation of the different business structures varies according to which structure you decide is best for your business. Sole Proprietorships are created by merely acting as one, even without filing anything with anybody. LLCs and corporations typically cost under $1,000 to create, unless you have needs for complicated shareholder agreements (for Corporations) or operating agreements (for LLCs).

Key Steps in Transitioning to Business Ownership

The key question is why some businesses fail and others succeed. This is a debatable question and there are many opinions on this subject. However, I believe the core of the problem lies in the inability to develop good business habits from the onset of the transition into business ownership.

Too many people jump into business without fully understanding the level of involvement required to run a successful business. A common mistake, often made, is miscalculating the volume of effort needed and the resilience required to manage the ups and downs of business ownership. The bottom line is that those who are not mentally prepared for the journey of transition will have difficulties with business management and growth.

Here are 7 important steps to consider in transitioning to business ownership:

Develop a business plan from the inception of the business all the way to the exit strategy. The best way to begin the process is to start with a vision which is often the big picture outlook. You can go about this by writing down everything you want to achieve. Consider this exercise the playground of ideas and exploration; a place where you have emptied all your toys to get a clear picture of what's available in order to contemplate your next move.

Take an inventory of your skills and abilities. Understand your strengths and weaknesses. This exercise will be helpful in the future as you come face-to-face with the daily management of the business. Don't try to do it all. Don't haggle with those things you are not strong in. Seek out the experts; it is well worth the investment.

Know your industry thoroughly. Stay informed and be aware of the trends and how they can affect or impact your business. All the while, be ready to make necessary adjustments to your business strategies, such as implementing new approaches to old challenges based on what's taking place in your industry.

Set powerful goals and work towards achieving them because they are the lifeline of your business. Follow the SMART acronym for setting goals. Be sure they are Specific, Measurable, Attainable, Realistic and Timely. Select goals that reflect the different aspects of your life, such as spiritual, business, family, etc. Les Brown says: "Life takes on meaning when you become motivated, set goals and charge after them in an unstoppable manner". Without goals we function aimlessly and have purposeless lives. Goals give direction to fulfilling one's purpose.

Integrate your marketing strategy into your business. Remember that the business plan is the guiding tool and is not an ornament for display. Follow the strategy and adjust as needed. Though the foundation will stand, but the implementation may vary. Get to know the pain points of your target market. Understanding their needs and challenges is critical in developing appropriate solutions to solve your clients' problems.

Build up a network of support. In addition to our own self motivation, much is said about external motivation and inspiration when interacting with other like-minded individuals. Take time to be inspired by the success of others and learn from their mistakes.

Apply technology to streamline the business. Make deliberated efforts to keep up with technology as it relates to your business and apply it to improve business efficiencies and enhance management. Understand how technology can be useful and appropriate in your business.

There is no doubt business ownership helps to realize dreams. It also requires consistent, intentional, and deliberate actions to deal with industry changes and other economic factors that can adversely affect the business. At times we need additional direction and support to transcend to the next level. Don't overlook the high returns you will achieve when you make the right investment. They can make the difference in running a successful business.

Does Social Media Belong in Your Business Plan

Social Media has become a worldwide phenomenon but does it belong in your business plan? The growth in usage statistics are staggering across the numerous platforms that make up this online world. I recently read a blog post that discussed 52 different social media sites. These were presented in groups under the following categories - sites that you can use to network with others, those that help you promote your products/services and those that enable you to share information with others.

The starting point for answering the question "Does social media belong in your business plan" is the understanding that a business plan is a living, breathing, ever-changing document. My concern is that too many business owners of small to medium size businesses either don't develop a business plan at all or if they do, they don't revisit it periodically to keep it fresh and relevant.

While social media has existed for some time now, its use for business is a rather recent development. This has come about as a result of its increasing acceptance by the population in general, businesses finding ways to capitalize on it, larger businesses dedicating resources to it and the social media platforms offering more business oriented capabilities. Those business owners that are keeping their plans current are likely to already have included it as a consideration. For others, this new technology may force them to dust off their current business plan and take a fresh look from a new perspective.

So, how should social media be incorporated into a business plan? To answer that question, let's examine some of the key elements of a business plan. First, let's look at "Market Analysis". Has social media had an impact on the specific industry related to your business? For example, if you own a restaurant you need to know whether or not any of the these platforms could help you grow your business. In this case, two immediately come to mind - Yelp and Foursquare. It would be important to be proactive with the use of these platforms in your business planning. Another area of market analysis is "Competitive Analysis". In this section of your business plan have you analyzed how your competitors are using social media platforms? For example, do they have a business page on Facebook? Do they use Facebook ads? Along these same lines, you need to consider how investing in these platforms can help you with your competitive differentiation. How can you use them to make your business stand out from the rest?

Another area of your business plan that should include consideration of social media is the "Organization and Management" section. The use of these technologies requires resources. Consideration needs to be given to whether these will be internal or external. In addition, social media can provide an effective platform for managing customer service, including issues. It has provided new methods for people to share their opinions about a business and its service. It is important to follow these developments and pay attention to whether or not your customers are providing information to their online friends about your business.

A third area of your business plan to consider is "Marketing and Sales". This is a crucial area for those that decide to dedicate time, energy and money to the use of social media. A focused strategy is critical to success or you may spend thousands of dollars with little return to show for it. Consistent messages, attracting people to your products and converting them to customers requires proper business planning for successful execution.

The last area of your business plan to consider is the "Financial" section. Unfortunately, I have encountered owners of small to medium size businesses that have spent money for online services such as a web site that are never going to give them a return on their investment because the site is not likely to be found among the millions of web sites that exist today. However, these new platforms can provide very cost effective alternatives for promoting your business. The 2011 Social Media Marketing Industry Report compiled by Social Media Examiner reports that small business owners are seeing the greatest benefit from marketing with these new tools.

In summary, the growth of social media indicates that it is here to stay. That doesn't mean that every platform will survive however. It is important to periodically review your business plan using the sections highlighted in the business plan format used throughout this article to ensure that your business is taking advantage of the growth opportunities that social media has to offer.

Can a Small Business Compete With Larger Organizations

I'm often asked a very specific question, usually in a troubled voice, when speaking to groups of small business people. Can small business compete with Wal-Mart? Not to single out one retailer, we are really talking about any large organization. With the recent extensive expansion of businesses (and their sophisticated/aggressive approach to marketing and customer service) it's no wonder this question is on the minds of many small businesses today.

I would like to suggest that what small businesses might be suffering from is an inferiority complex. We automatically assume defeat before we have considered the advantages we have going for us.

1. Outmaneuver Them

A small business can view itself as a speedboat able to maneuver quickly, slowing down or speeding up as needed, and completely turn around in a much smaller space than a larger business or battleship for example.

2. Offer Genuine Personal Attention

Small business can offer real, personal attention, greeting you by name and having a brief conversation as you enter their establishment. After all, customer service is more than screaming 'hello' indiscriminately when someone walks into a store. I find this particular activity, conducted mostly by larger chain stores, to be somewhat unsettling and quite insincere.

3. Choose Between Help And Help Yourself

I prefer to buy from a small business because they're typically more ready, willing and able to help me. It seems like sometimes you have to make a choice between help and help yourself in the larger chains. Staff at some larger organizations tends to be busy stocking shelves and while they may point out where something is, they don't always have the time or the expertise to assist you in making a purchasing decision.

4. Education

Education can be an important part of the purchasing process. When you have multiple products delivering essentially the same benefits it is not always easy to make the right choice. In order to select the best product or service for your needs you may require education. Small businesses tend to be better suited at offering assistance and in cases of special needs they are the only choice for 1 time requests or requests for unusual or rare products.

5. Tailor Your Product Offerings

A small business has the ability to tailor their product or service selection to their specific customers. The most popular products or services your specific customer group desires can be stocked in depth. This can be a disadvantage at some large businesses as they may carry a wide range of products but a very shallow depth of choice within a specific product group. Consider that your business may represent one section of one aisle at a big box store. You don't need to worry about the rest of their store and the rest of the products they offer as you are not in those businesses.

6. Training

Make sure you don't make the same mistakes that some large businesses make. Don't fall into the trap of being too busy to provide good service. Unfortunately, several large businesses seem to have staff to stock shelves but not very many people to help you and in some cases even to take your money. Somehow I can't imagine any small business allowing a customer to stand in the middle of the floor with their money in their hands and no one to give it to. This unfortunate experience happened to me in one of our well-established Canadian department stores. Forget about the concept of up selling, I couldn't even pay for the one item I came in to get.

But remember small doesn't automatically guarantee good service either. It's up to you to train your staff. Your larger competitors likely have training programs in place. You have an advantage in that you can have an informal, real time, on the spot, as needed training program for your staff. The trick is to augment any formal group training with small amounts of input at the time when the education is needed. If you notice something wrong or there's a situation where you can improve your service it can be put into effect almost immediately versus your larger competitors - the battleship, who may have to take months to develop a more formal structured training program.

7. Don't Compete On Price Alone

Some small businesses charge a little more than a larger competitor but that's OK. There are segments of your target group willing to pay a little more in order to receive additional service. It's up to you to provide the additional service. And make sure they are aware they are receiving added value. There will always be customers that look for the lowest price and they will shop around, use your time and expertise and ultimately end up going to your larger competitors to make the purchase.

Increasing Your Business Through Networking

Many people do not realize that they can increase their businesses by 25%, 50% and even 100% by simply liaising with other like-minded professionals as they.

Business networking groups are making waves as they are contributing to the success of businesses. They mostly take advantage of the world's best technique of growing business: word-of-mouth. The technique may seem rudimentary, but it appears to still have the center-stage when it comes to advertising.

The import of word-of-mouth program has been brought to the limelight by BNI, a business networking organization which has over 6,200 active chapters and 140,000 members in about 50 countries in the world. With regards to business referrals, BNI is widely recognized as the most successful organization in this domain. This success is based on principles that ensure that qualified referrals are made. Qualified referrals are serious in nature with the potential of positively impacting the business network. For this purpose BNI provides a structured system and a supportive environment for its members to give and receive business.

Indeed BNI founder, Dr. Ivan Misner strongly believes that "Givers Gain" and this philosophy is communicated to BNI members to encourage them to bring referrals to other members as "what goes around, comes around".

BNI employs an effective word-of-mouth method to help increase the business opportunities of members through worthy, beneficial relationships with business professionals. Over time, BNI has proven that successful businesses flourish through word-of-mouth strategy. It is another major advantage that new participants are guaranteed to gain in a business networking group of this nature.

If you are a business person or professional, you have the choice of increasing your business as much as you desire: all you may require is to get in touch with a BNI chapter closest to you and start participating in referral meetings. In Australia alone, members of BNI reported generating more than $A200 million from business referrals in the year 2011.

Referral meetings are regular meetings where participating members have the possibility of finding their dream referrals to boost their business. But while expecting to get referrals, members are also exhorted to come with their own referrals for the benefits of the other members: for more effective results members share their business cards, website address or brochures with one another. This way, the various members of the business networking chapter could be playing the role of sales representatives for one another; indeed if they met people they think will benefit from the service or products of a fellow member, they aptly recommend him.

BNI meetings are generally held weekly. In as much as personal presence of BNI members is ideal during these meetings, it is obvious that it will not always be possible. In that case members can plan for substitutes. Substitutes are simply people that you are confident enough that they can ably represent your business. They are also considered by BNI to be great sources of referrals.

Nobody and no business is either too small or too big to network with others. But to effectively do this and avoid disappointment it is advisable to go through established groups. However, it is worth noting that how well you will do in a business networking group will also depend on your capabilities and your drive.

Financial and time commitment is a very important factor to take into consideration when planning to join a business networking group like BNI. This determines the level of success you will get by virtue of your membership.

In a nutshell, we can say that participating in a business networking organization like BNI helps you gain the following:

Patience: the fact that it takes time to build relationships with members of the chapter and to get to understand their business helps you grow more patient about the realization of your ambitions. You could use time to your benefit.

commitment: at BNI you learn to stick to your desire until you see it materialized.

Learning new things: you are exposed to new knowledge, new businesses and therefore are presented with opportunities to probably make new choices.

Low cost advertising: you do not need to spend much money to organize advertisement or run public relations for your business. Your fellow networking members have become the voice for your business.

As the saying goes "no man is an island". To do well in your chosen field of endeavor, there is need to rub minds together with others. Networking with others has become the necessary requirement for sustainable success. And business networking offers the necessary impetus needed to take your business to the next level.

Stephen and Kerrie Butler operate the Business Sustainability Institute, they partner with small and medium size businesses to fix their problems and help realise their dreams.