structure and ownership in business plan

Protecting Business Ownership Legally

Protecting business ownership legally requires a thorough approach that spans entity structuring, intellectual property protection, contractual safeguards, liability mitigation, trade secret preservation, and succession planning. A well-defined business structure and effective corporate governance practices establish a solid foundation for ownership protection. Intellectual property registration and patent strategies safeguard innovation, while detailed contracts and partnership agreements clarify roles and responsibilities. Limiting personal liability exposure through asset partitioning and insurance options is also vital. By adopting these measures, business owners can protect their interests and their enterprise remains competitive and viable, laying the groundwork for long-term success.

Table of Contents

Establishing a Solid Business Structure

A well-defined business structure serves as the foundation upon which all other aspects of the organization are built, providing a clear framework for ownership, management, and operational responsibilities. This structure is vital for defining the business entity, which can take various forms such as a sole proprietorship, partnership, limited liability company (LLC), or corporation. Each business entity type has its own unique characteristics, advantages, and disadvantages, and selecting the most suitable entity type is pivotal for protecting business ownership. Effective corporate governance is also imperative in ensuring that the business is managed and operated in a transparent and accountable manner. This involves establishing clear roles and responsibilities, setting policies and procedures, and implementing checks and balances to prevent abuse of power. A well-structured business entity with sound corporate governance practices provides a solid foundation for protecting business ownership and promoting long-term sustainability.

Protecting Intellectual Property Rights

Protecting intellectual property (IP) is a vital aspect of safeguarding business ownership, as it enables companies to differentiate themselves and maintain a competitive edge. Effective IP protection involves registering trademarks and developing patent protection strategies to prevent unauthorized use or theft of valuable intangible assets. By implementing these measures, businesses can safeguard the long-term viability and profitability of their innovative products, services, and brand identities.

Trademark Registration Process

The United States Patent and Trademark Office (USPTO) oversees the trademark registration process, which involves a series of steps that help business owners secure exclusive rights to their unique identifiers. A trademark is a fundamental component of a business's brand identity, as it distinguishes a company's products or services from those of its competitors. In today's digital age, a strong online presence is essential, and a registered trademark can help protect a business's online assets from infringement.

To secure a trademark, business owners must:

• Conduct a thorough search of existing trademarks to verify their mark is unique
• Prepare and submit a trademark application, including a detailed description of the mark and the goods or services it will represent
• Respond to any office actions or oppositions that may arise during the registration process

Patent Protection Strategies

Beyond trademarks, patents play a vital role in safeguarding innovative concepts, products, and processes that set businesses apart from competitors, making a thorough patent protection strategy a necessity for companies seeking to maintain their competitive edge.

An effective patent protection strategy involves conducting thorough patent landscaping to identify potential patent trolls and anticipating potential infringement risks. This involves analyzing existing patents in the industry, identifying gaps and opportunities, and developing a strategy to protect intellectual property rights.

Drafting Comprehensive Contracts

Crafting a vital contract is a pivotal step in solidifying business relationships, as it outlines the terms and conditions that govern interactions between parties. A comprehensive contract serves as a safeguard against potential disputes and ensures that all parties are aware of their rights and obligations.

When drafting a contract, it is essential to include specific clauses that address critical aspects of the business relationship. This includes:

• Contract Clauses : Clearly defining the scope of work, payment terms, and intellectual property rights to avoid misunderstandings.
• Dispute Resolution : Establishing a process for resolving disputes, such as mediation or arbitration, to minimize costly litigation.
• Termination Provisions : Outlining the circumstances under which the contract can be terminated, including notice periods and consequences.

Limiting Personal Liability Exposure

When structuring a business, it is essential to consider the potential risks that can compromise personal assets. Limiting personal liability exposure is crucial to safeguard owners' personal wealth and financial security. By implementing effective liability protection strategies and shielding personal assets, business owners can minimize their exposure to financial risk and ensure the continued viability of their enterprise.

Shielding Personal Assets

Numerous business owners mistakenly believe that incorporating their venture automatically shields their personal assets from liability exposure, yet this assumption can lead to devastating consequences in the event of a lawsuit or creditors' claims. In reality, incorporating a business only provides limited liability protection, and personal assets can still be at risk. To truly shield personal assets, business owners must take additional steps.

To effectively limit personal liability exposure, business owners should consider the following strategies:

• Asset Partitioning : Segmenting business and personal assets into separate legal entities, such as limited liability companies (LLCs) or trusts, to create a barrier between them and limit liability exposure.
• Insurance Umbrella : Obtaining adequate insurance coverage, such as liability insurance or umbrella policies, to protect personal assets from lawsuits and claims.
• Proper Entity Structuring : Ensuring that business entities are properly structured and maintained to provide maximum liability protection.

Liability Protection Strategies

Effective liability protection strategies involve a multi-layered approach that combines legal, financial, and insurance mechanisms to safeguard personal assets from the risks associated with business operations. A comprehensive risk assessment is essential to identify potential vulnerabilities and prioritize protection efforts. This includes evaluating the business's operational risks, contractual liabilities, and potential legal exposures.

Insurance options play a crucial role in liability protection strategies. Business owners should consider a range of insurance products, including general liability, professional liability, and directors' and officers' liability insurance. These policies can provide financial protection in the event of legal claims or lawsuits. Additionally, business owners may consider umbrella insurance policies to provide excess liability coverage beyond the limits of their primary insurance policies.

Safeguarding Trade Secrets

To prevent unauthorized disclosure or misuse, businesses must implement robust measures to safeguard their trade secrets, which are critical components of their intellectual property and often a key driver of their competitive advantage. Trade secrets can include proprietary recipes, software, business methods, and other confidential information that gives a company a competitive edge.

To effectively safeguard trade secrets, businesses should consider the following measures:

• Implement Confidentiality Agreements with employees, contractors, and partners to confirm that access to sensitive information is limited and that recipients are bound by confidentiality obligations.
• Conduct thorough Employee Screening to assess the trustworthiness of individuals with access to trade secrets, including background checks and reference verifications.
• Establish secure data storage and access protocols, such as encryption, secure servers, and restricted access to sensitive information, to prevent unauthorized access or data breaches and guarantee the protection of sensitive information.

Navigating Partnership Agreements

While safeguarding trade secrets is vital, businesses must also carefully navigate partnership agreements to protect that collaborative relationships do not inadvertently compromise their intellectual property. A well-drafted partnership agreement is imperative to establish clear roles, responsibilities, and expectations among partners. This agreement should outline the terms of ownership, management, and decision-making processes to avoid potential disputes. Conflict Resolution mechanisms should be incorporated to address any disagreements that may arise, guaranteeing that the partnership remains intact. Furthermore, Exit Strategies should be outlined, defining the process for partner withdrawal, dissolution, or sale of the business. This includes specifying the valuation method, payment terms, and any non-compete clauses. By having a thorough partnership agreement in place, businesses can mitigate potential risks and safeguard their intellectual property. A detailed partnership agreement will provide a clear roadmap for the partnership, allowing partners to focus on driving business growth and success.

Preparing for Succession Planning

A business's long-term viability and continuity hinge on its ability to develop a thorough succession plan, securing that ownership shifts seamlessly and intellectual property remains protected. Succession planning is vital for family-owned businesses, where family dynamics can impact the handover process. It's imperative to identify and develop future leaders, guaranteeing a smooth leadership passage.

To achieve a successful succession plan, consider the following key elements:

• Clear goals and objectives : Define the company's vision, mission, and values to guide the succession process.
• Identify and develop future leaders : Recognize potential successors and provide training, mentorship, and opportunities for growth.
• Establish a formal handover timeline : Create a detailed plan with specific milestones and deadlines to facilitate a seamless shift.

Frequently Asked Questions

Can a spouse be held liable for business debts in a sole proprietorship?.

In a sole proprietorship, a spouse may be held liable for business debts in community property states, as marital assets are jointly owned, compromising asset protection; however, liability varies depending on jurisdiction and specific circumstances.

What Happens to Business Ownership in the Event of a Divorce?

In divorce proceedings, business ownership can be affected, necessitating consideration of prenuptial agreements and post-divorce settlements to determine asset distribution, ensuring clarity on ownership and control of the business entity.

Can Business Partners Be Held Personally Liable for Company Debts?

In the absence of proper structuring, business partners can be held personally liable for company debts, emphasizing the importance of limited liability entities and extensive business insurance to mitigate risk and protect personal assets.

Do Business Owners Need to Register Their Trademarks Internationally?

When pursuing global expansion, registering trademarks internationally is vital for brand protection, as it prevents unauthorized use and maintains consistency in brand identity across jurisdictions, thereby safeguarding a company's valuable intellectual property assets.

Can Business Owners Transfer Ownership to a Family Member Tax-Free?

Business owners can transfer ownership to a family member tax-free through gifting shares, ensuring a seamless handover and preserving the family legacy, but careful planning and valuation are vital to avoid potential tax implications.

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Once only the responsibility of sustainability managers, ESG performance and sustainability are today considered key areas of strategic focus for organizations, often reflected in Sustainability Action Plans developed by organizations.

Looming investor pressure, consumer awareness and the understanding that sustainability is an important tenet in risk management and corporate governance has seen responsibilities shift and awareness ripple across both departments and management levels. The tidal shift has been embraced by organizations as they champion decarbonization. It presents ever-growing opportunities for innovation and increased investments towards green technologies, which ultimately accelerate sustainability.

Much like operational plans are developed to future-proof an organization’s success, so too are Sustainability Action Plans in helping to achieve a low-carbon business fit for the future. In this article, we lay out practical guidance on how to create a Sustainability Action Plan along with recommended inclusions and structure. We also provide a free Sustainability Action Plan template for download to support your sustainability and environmental, social and governance (ESG) goals.

What is a Sustainability Action Plan?

A Sustainability Action Plan is created by an organization to detail how it will achieve sustainability goals over time, particularly if ambitious targets have been set, such as achieving net zero by a specific time frame. It is usually a static document that details a two to five-year timeline of objectives, although this period is at the organization’s discretion.

Its purpose is to embed ESG and sustainability across an organization, within all business operations. The path to a Sustainability Action Plan typically starts with a vision at an executive level, with the Sustainability Action Plan serving as the detailed strategy of how the vision will be achieved.

To complement the Sustainability Action Plan, organizations often release annual Sustainability Reports that detail the organization’s progress against the objectives. Together, Sustainability Action Plans and Sustainability Reports function as an important communications tool for organizations to illustrate their sustainability journey to a wide audience of stakeholders.

Sustainability Action Plans are not mandatory, rather, they are an initiative of an organization who wishes to make a positive impact on their sustainability performance.

In addition to planning and internal reporting, many organizations disclose their sustainability performance via various ESG reporting frameworks. In some instances, the data collected for the production of a Sustainability Action Plan can be used to support the reporting requirements of frameworks such as GRI, GRESB and SASB.

And vice-versa, organizations reporting detailed information to ESG reporting frameworks may export some of those responses to their Sustainability Action Plans to illustrate how they are performing against their goals.

This task is made easy with Envizi’s ESG Reporting Frameworks module which allows organizations to collate responses for both external and internal reporting frameworks in one place. In addition to collating responses, the module includes functionality to extract responses for use in documentation such as a Sustainability Action Plan.

Who needs a Sustainability Action Plan?

Organizations of all sizes can make steps towards making their business operations more sustainable and positively contributing to their community and environment. Smaller organizations should consider the resource requirements of developing a comprehensive Sustainability Action Plan and achieving those objectives over time.

For larger organizations, a comprehensive Sustainability Action Plan is ideal for outlining the long-term vision and plans to satisfy investor requirements, to change consumer attitudes and to take advantage of opportunities. This is especially the case once pledges have been made, as the next stage in the process is to work out exactly how the organization will achieve those pledges.

How to create a Sustainability Action Plan

A Sustainability Action Plan requires dedicated commitment across all levels of an organization, and it can be transformational as it requires a top-down approach with cultural change, realignment of values and leadership endorsement. As a result, there are several considerations to take into account when developing a plan.

The consultation process and stakeholder engagement

Much like corporate annual reports require the input of an executive team, the Board, finance department and other internal departments, so too does the process of creating a Sustainability Action Plan.

It requires extensive consultation across the executive and leadership levels, committees and even the community (depending on the sector and type of organization) to establish targets and accountabilities. At the center of the consultation process is an organization’s Sustainability Manager. In many organizations, the person in this role is responsible for developing both the business cases and doing the work to support the implementation and management of programs within organizations to deliver on their objectives.

Whether the organization has a Sustainability Manager or not, they may also choose to use the services of a sustainability consulting firm to guide them on the process and support their objectives.

Other examples of stakeholders involved in the consultation and implementation process may include:

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Establishing benchmarks

The Sustainability Action Plan will involve setting outcomes, actions and targets. Therefore it’s important that an organization understands its current ESG performance with accurate data to inform future benchmarks. Using an ESG and sustainability reporting software platform such as Envizi can simplify emissions calculations and automate the collection of energy consumption data, which will be required when reporting on the progress of the plan.

What is included in a Sustainability Action Plan?

Inclusions in a Sustainability Action Plan can vary depending on the type of organization, its size, and the sector it operates in. For example, a start-up or an independent education center such as a school may choose to focus on smaller initiatives to start implementing changes at the business.

Examples of achievable initiatives at this level could include:

• Using water tanks
• Gardening, such as a vegetable garden
• Recycling system
• Turning off lights when not in use
• Using energy-saving bulbs
• Implementing a printing policy

Larger organizations with ambitious goals and extensive resources could include initiatives such as:

Councils and municipalities

• Reducing Scope 3 emissions from suppliers
• Implementing a mass tree planting scheme
• Providing a community shuttle bus
• Introducing cycle routes
• Installing LED lighting

Property developers and organizations

• Optimizing HVAC equipment performance
• Using local labor and materials
• Incorporating water and waste reuse strategies
• Ensuring sustainability is part of client consultation and scoping
• Incentivizing staff remote-work opportunities

Manufacturing

• Reducing GHG emissions in the upstream supply chain
• Reducing power usage in data centers
• Investing in renewable energy sources
• Electrifying the transport fleet
• Upgrading energy-intensive equipment

Commercial real estate

• Developing a demand-side energy management strategy
• Minimizing waste
• Implementing renewable energy
• Improving  GRESB score
• Implementing end-of-trip facilities

Structure of a Sustainability Action Plan

Whilst the structure, inclusions and scale of a Sustainability Action Plan are at the organization’s discretion and stem from the initial consultation process, there are a few inclusions we recommend to ensure a Sustainability Action Plan which reflects an organization’s commitment to sustainability:

Sustainability values

Background on the organization’s view of sustainability and its core values which motivate the development of the Sustainability Action Plan.

Executive message

Endorsement at the C-Level usually from the CEO, outlining the organization’s commitment to sustainability.

Mandatory frameworks

If the organization operates within a sector which legislates reporting to a framework, this section would outline the requirements of that legislation or policy to provide stakeholders with context around the motivations for the Sustainability Action Plan.

Consultation process

Outlines how stakeholders participated in the development of the Sustainability Action Plan (such as workshops and forums), and which stakeholders were involved.

Methodology and review process

Outlines how the targets will be measured and progress monitored, which could include how regularly a Steering Committee or other key stakeholders will be updated. A Sustainability Report could be one of the vehicles for communicating this progress.

These are broad outcomes that steer the detailed actions and targets in the Sustainability Action Plan. Examples of outcomes could be “Decrease energy usage by 2025” or “Educate stakeholders.”

• Secondary outcomes These could be complementary outcomes which help to group actions within the broader outcome. Examples of secondary outcomes could be “Transport” or “Energy and emissions.”
• Action The tangible actions that will be undertaken to achieve a specific target within that secondary outcome, and broader outcome. Examples of actions could be “Replace inefficient HVAC systems” or “Develop recycling policy.”
• Target Specific KPIs placed against the actions to ensure progress is made. Examples of targets could be “100% of older HVAC systems replaced” or “75% increase in electronics diverted to e-waste programs.”
• Responsibility Assigning champions to action the targets could include listing departments or position titles.
• Timeframe Assigning specific months or quarterly timeframes ensures that targets can be realistically achieved.

The structure of a Sustainability Action Plan varies widely, and care should be taken to ensure that the inclusions of the plan, including the targets, are achievable for the organization.

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Kroger, Albertsons defend merger plan in federal court against U.S. regulator objections

The federal trade commission sued to prevent the $24.6 billion deal, alleging it would eliminate competition and raise grocery prices. albertsons, owner of jewel-osco, said nixing a merger could mean layoffs..

Faye Guenther, president of local UFCW 3000 (yellow shirt), hugs Carol McMillian, bakery manager at Kroger-owned King Soopers and member of Local 7, after a news conference Monday about the Kroger and Albertsons merger outside the federal courthouse in Portland, Ore.

Jenny Kane/AP Photos

PORTLAND, Ore. — Supermarket chain Albertsons told a federal judge Monday that it might have to lay off workers, close stores and even exit some markets if its planned merger with Kroger isn’t allowed to proceed.

The two companies proposed what would be the largest supermarket merger in U.S. history in October 2022. But the Federal Trade Commission sued to prevent the $24.6 billion deal, alleging it would eliminate competition and raise grocery prices in a time of already high food price inflation .

In the three-week hearing that opened Monday, the FTC is seeking a preliminary injunction that would block the merger while its complaint goes before an in-house administrative law judge.

“This lawsuit is part of an effort aimed at helping Americans feed their families,” the FTC’s chief trial counsel, Susan Musser, said in her opening arguments Monday.

Musser said Kroger and Albertsons compete in 22 states, closely matching each other on price, quality, private label products and services like store pickup. Shoppers benefit from that competition, she said, and will lose those benefits if the merger is allowed to proceed.

Customers also are wary of the merger, the lawyer said. In Santa Fe, New Mexico, for example, 278 shoppers wrote to the FTC to express their concerns about a combined Kroger and Albertsons, which would own five of the city’s eight supermarkets.

But Kroger and Albertsons insist the FTC’s objections don’t take into account the rising competition in the grocery sector. Walmart’s grocery sales totaled $247 billion last year, compared to $63 billion in 2003, for example; Costco’s sales have grown more than 400% in the same period.

“Consumers are blurring the line of where they buy groceries,” Albertsons attorney Enu Mainigi said.

Mainigi said Albertsons’ customers now spend 88 cents of every dollar at competitors that range from Aldi and Trader Joe’s to Dollar General. Albertsons can’t compete with larger rivals that have national scale, but joining forces with Kroger would help it do that, she said.

Kroger attorney Matthew Wolf also defended the proposed merger.

“The savings that come from the merger are obvious and intuitive. Kroger may have the best price on Pepsi. Albertsons may have the best price on Coke. Put them together, they have the best price on both,” Wolf said.

The two sides also disagree on Kroger and Albertsons’ plan to sell 579 stores in places where their stores overlap. The buyer would be C&S Wholesale Grocers , a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly store brands.

The FTC said C&S is ill-prepared to take on those stores. Laura Hall, the FTC’s senior trial counsel, cited internal documents that indicated C&S executives were skeptical about the quality of the stores they would get and may want the option to sell or close them.

But Wolf said C&S has the experience and infrastructure to run the divested stores and would be the eighth-largest supermarket company in the U.S., if the merger plan goes through.

The commission also alleges that workers’ wages and benefits would decline if Kroger and Albertsons no longer compete with each other.

Before the hearing, several members of the United Food and Commercial Workers International union gathered outside the federal courthouse in downtown Portland to speak against the proposed deal.

“Enough is enough,” said Carol McMillian, a bakery manager at a Kroger-owned grocery store in Colorado. “We can no longer stand by and allow corporate greed that puts profit before people. Our workers, our communities and our customers deserve better.”

The labor union also expressed concern that potential store closures could create so-called food and pharmacy “deserts” for consumers.

For people in many communities across the U.S., when a grocery store shutters, “their only source of food actually is walking to the nearest gas station,” said Kim Cordova, president of UFCW Local 7, which represents more than 23,000 members in Colorado and Wyoming.

Mainigi argued the deal could actually bolster union jobs, since many of Kroger’s and Albertsons’ competitors, like Walmart or Costco, have few unionized workers.

U.S. District Judge Adrienne Nelson is expected to hear from nearly 40 witnesses, including the chief executives of Kroger and Albertsons, before deciding whether to issue the preliminary injunction. If she does decide to temporarily block the merger, the FTC’s in-house hearings are scheduled to begin Oct. 1.

But Nelson’s decision will seal the merger’s fate, according to Wolf. He said the FTC’s in-house administrative process is so long and cumbersome that merger deals almost always fall apart before it’s through. Earlier this month, Kroger sued the FTC, alleging the agency’s internal proceedings were unconstitutional and saying it wants the merger’s merits decided in federal court.

The attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming all joined the case on the FTC’s side. Washington and Colorado filed separate cases in state courts seeking to block the merger.

Kroger , based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including the brands Ralphs , Smith’s and Harris Teeter. Albertsons , based in Boise, Idaho, operates 2,273 stores in 34 states, including the brands Safeway, Jewel-Osco and Shaw’s. Together, the companies employ about 710,000 people.

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What We Know About Kamala Harris’s $5 Trillion Tax Plan So Far

The vice president supports the tax increases proposed by the Biden White House, according to her campaign.

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By Andrew Duehren

Reporting from Washington

In a campaign otherwise light on policy specifics, Vice President Kamala Harris this week quietly rolled out her most detailed, far-ranging proposal yet: nearly $5 trillion in tax increases over a decade.

That’s how much more revenue the federal government would raise if it adopted a number of tax increases that President Biden proposed in the spring . Ms. Harris’s campaign said this week that she supported those tax hikes, which were thoroughly laid out in the most recent federal budget plan prepared by the Biden administration.

No one making less than $400,000 a year would see their taxes go up under the plan. Instead, Ms. Harris is seeking to significantly raise taxes on the wealthiest Americans and large corporations. Congress has previously rejected many of these tax ideas, even when Democrats controlled both chambers.

While tax policy is right now a subplot in a turbulent presidential campaign, it will be a primary policy issue in Washington next year. The next president will have to work with Congress to address the tax cuts Donald J. Trump signed into law in 2017. Many of those tax cuts expire after 2025, meaning millions of Americans will see their taxes go up if lawmakers don’t reach a deal next year.

Here’s an overview of what we now know — and still don’t know — about the Democratic nominee’s views on taxes.

Higher taxes on corporations

The most recent White House budget includes several proposals that would raise taxes on large corporations . Chief among them is raising the corporate tax rate to 28 percent from 21 percent, a step that the Treasury Department estimated could bring in $1.3 trillion in revenue over the next 10 years.

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4 Ownership structures and legal forms

Businesses not only vary in size and industry but also in their ownership. Some are owned by just one person or a small group of people, some are owned by large numbers of shareholders, some are owned by charitable foundations or trusts, and some are even owned by the state. Different ownership structures overlap with different legal forms that a business can take. A business’s legal and ownership structure determines many of its legal responsibilities, including the paperwork that the owners need to complete in order to set up the business, the taxes the business has to pay, how profits from the business are distributed, and the owners’ personal responsibilities if the business makes a loss or goes bankrupt.

It is not necessary to go into great detail on legal forms and ownership structures here but a short overview will help you to appreciate the diversity of businesses. At the broadest level it is possible to distinguish between organisations that are owned and run by private owners, those that are owned and run by the state and those that are run by voluntary organisations. Here we will first look at different types of privately owned businesses.

Legal forms and ownership structures of businesses are different from country to country. In the United Kingdom the majority of businesses (but not all) are sole traders, limited companies or business partnerships (UK Government, n.d.).

• Sole trader – a person who is running a business as an individual. Sole traders can keep all the business’s profits after paying tax on them but they are personally responsible for any losses the business makes (i.e. they would have to cover them out of their private money if necessary), paying the bills incurred by the business (e.g. stock or equipment), and keeping a record of all sales and expenditures. Sole traders can take on employees – the term implies that they own the business on their own, not that they must work there alone.
• Limited company – an organisation set up by its owners to run their business. A limited company is a legal person . Of course, a company is not a person in the sense we commonly understand it. What the term means is that the law regards a limited company as having the same legal standing as a person, i.e. it has legal rights and obligations in itself, which are independent from the rights and obligations of its owners as individuals. For example, a limited company can own property. A limited company’s finances are separate from the finances of its owners. Any profit made after taxes belongs to the company. The company can then share its profits, most commonly among all the owners. Limited companies have ‘members’, i.e. the people who own the shares. A limited company also has ‘directors’. Directors may be share owners but they don’t have to be. Shareholders’ and directors’ responsibilities for the company’s financial liabilities (such as losses or debts) are limited to the value of their shareholdings. This means that they do not have to pay out of their personal income or assets if the company runs into financial difficulties. There are two main types of limited company: private limited companies and public limited companies. The shares of public limited companies (PLCs) are traded in the stock market, where anybody can buy shares in the company if they wish to do so. Private limited companies are not traded in the stock market and other people can only buy shares in them with the approval of the current owners (for example, if they are invited to invest in the company by the current owners).
• Business partnerships – an arrangement where two or more individuals share the ownership of a business. There are two main types of partnership: general partnerships and limited partnerships. In a general partnership all partners are personally responsible for the business, meaning they are liable for any losses or debts with their personal income or wealth if necessary. In a limited partnership partners are not personally liable if the business incurs any losses or debts. Profits from a partnership are shared between the partners and each partner then pays taxes on their share. There are a lot of fine details and several possible permutations in the structure of business partnerships, which are important when setting one up but need not concern us any further here.

There are some other legal ownership structures for businesses in the UK (including some different laws relating to partnerships in Scotland) but the three introduced above are the most common. Similar business ownership structures exist in many other countries although the precise legal implications can differ in important ways.

Legal and ownership structures, business size and industry sector are not entirely independent of each other. For example, most sole traders tend to be small businesses, not least because a single individual rarely has the financial capacity to finance a very large business, nor the desire to be personally liable with all that they own if a large business were to run into financial troubles. Certain industry sectors require large businesses. For example, it is not viable to run a small steel works because the physical and financial investment required are so large. In other cases, industry sector and legal form are closely related. For example, law firms and some other professional service firms with more than one professional working in them in the United Kingdom are legally required to be set up as partnerships and no other ownership or legal structure is permitted.

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• Building Your Business
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• Business Plans

Writing the Organization and Management Section of Your Business Plan

What is the organization and management section in a business plan.

• What to Put in the Organization and Management Section

Organization

The management team, helpful tips to write this section, frequently asked questions (faqs).

vm / E+ / Getty Images

Every business plan needs an organization and management section. This document will help you convey your vision for how your business will be structured. Here's how to write a good one.

Key Takeaways

• This section of your business plan details your corporate structure.
• It should explain the hierarchy of management, including details about the owners, the board of directors, and any professional partners.
• The point of this section is to clarify who will be in charge of each aspect of your business, as well as how those individuals will help the business succeed.

The organization and management section of your business plan should summarize information about your business structure and team. It usually comes after the market analysis section in a business plan . It's especially important to include this section if you have a partnership or a multi-member limited liability company (LLC). However, if you're starting a home business or are  writing  a business plan for one that's already operating, and you're the only person involved, then you don't need to include this section.

What To Put in the Organization and Management Section

You can separate the two terms to better understand how to write this section of the business plan.

The "organization" in this section refers to how your business is structured and the people involved. "Management" refers to the responsibilities different managers have and what those individuals bring to the company.

In the opening of the section, you want to give a summary of your management team, including size, composition, and a bit about each member's experience.

For example, you might write something like "Our management team of five has more than 20 years of experience in the industry."

The organization section sets up the hierarchy of the people involved in your business. It's often set up in a chart form. If you have a partnership or multi-member LLC, this is where you indicate who is president or CEO, the CFO, director of marketing, and any other roles you have in your business. If you're a single-person home business, this becomes easy as you're the only one on the chart.

Technically, this part of the plan is about owner members, but if you plan to outsource work or hire a virtual assistant, you can include them here, as well. For example, you might have a freelance webmaster, marketing assistant, and copywriter. You might even have a virtual assistant whose job it is to work with your other freelancers. These people aren't owners but have significant duties in your business.

Some common types of business structures include sole proprietorships, partnerships, LLCs, and corporations.

Sole Proprietorship

This type of business isn't a separate entity. Instead, business assets and liabilities are entwined with your personal finances. You're the sole person in charge, and you won't be allowed to sell stock or bring in new owners. If you don't register as any other kind of business, you'll automatically be considered a sole proprietorship.

Partnership

Partnerships can be either limited (LP) or limited liability (LLP). LPs have one general partner who takes on the bulk of the liability for the company, while all other partner owners have limited liability (and limited control over the business). LLPs are like an LP without a general partner; all partners have limited liability from debts as well as the actions of other partners.

Limited Liability Company

A limited liability company (LLC) combines elements of partnership and corporate structures. Your personal liability is limited, and profits are passed through to your personal returns.

Corporation

There are many variations of corporate structure that an organization might choose. These include C corps, which allow companies to issue stock shares, pay corporate taxes (rather than passing profits through to personal returns), and offer the highest level of personal protection from business activities. There are also nonprofit corporations, which are similar to C corps, but they don't seek profits and don't pay state or federal income taxes.

This section highlights what you and the others involved in the running of your business bring to the table. This not only includes owners and managers but also your board of directors (if you have one) and support professionals. Start by indicating your business structure, and then list the team members.

Owner/Manager/Members

Provide the following information on each owner/manager/member:

• Percentage of ownership (LLC, corporation, etc.)
• Extent of involvement (active or silent partner)
• Type of ownership (stock options, general partner, etc.)
• Position in the business (CEO, CFO, etc.)
• Duties and responsibilities
• Educational background
• Experience or skills that are relevant to the business and the duties
• Past employment
• Skills will benefit the business
• Awards and recognition
• Compensation (how paid)
• How each person's skills and experience will complement you and each other

Board of Directors

A board of directors is another part of your management team. If you don't have a board of directors, you don't need this information. This section provides much of the same information as in the ownership and management team sub-section. 

• Position (if there are positions)
• Involvement with the company

Even a one-person business could benefit from a small group of other business owners providing feedback, support, and accountability as an advisory board. 

Support Professionals

Especially if you're seeking funding, let potential investors know you're on the ball with a lawyer, accountant, and other professionals that are involved in your business. This is the place to list any freelancers or contractors you're using. Like the other sections, you'll want to include:

• Background information such as education or certificates
• Services provided to your business
• Relationship information (retainer, as-needed, regular, etc.)
• Skills and experience making them ideal for the work you need
• Anything else that makes them stand out as quality professionals (awards, etc.)

Writing a business plan seems like an overwhelming activity, especially if you're starting a small, one-person business. But writing a business plan can be fairly simple.

Like other parts of the business plan, this is a section you'll want to update if you have team member changes, or if you and your team members receive any additional training, awards, or other resume changes that benefit the business.

Because it highlights the skills and experience you and your team offer, it can be a great resource to refer to when seeking publicity and marketing opportunities. You can refer to it when creating your media kit or pitching for publicity.

Why are organization and management important to a business plan?

The point of this section is to clarify who's in charge of what. This document can clarify these roles for yourself, as well as investors and employees.

What should you cover in the organization and management section of a business plan?

The organization and management section should explain the chain of command , roles, and responsibilities. It should also explain a bit about what makes each person particularly well-suited to take charge of their area of the business.

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Business Plan Tutorial: Types of Business Ownership for 2024

The decision to own and operate a business can be both exciting and daunting. Business ownership is a multifaceted concept that requires careful planning, preparation, and execution. In this tutorial, we will explore the different types of business ownership and provide a comprehensive guide to creating a successful business plan.

Overview of Business Ownership

Business ownership refers to the legal ownership and control of a business entity. There are several types of business ownership structures, including sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Each structure has its own unique advantages and disadvantages, depending on the nature of the business and the goals of the owner.

For instance, sole proprietorships are the simplest form of ownership and are owned and operated by a single individual. They are easy to set up and require minimal regulatory compliance. However, sole proprietors are personally liable for all the debts and obligations of the business, which can be a significant drawback.

On the other hand, corporations are complex legal entities established under state law. They provide limited liability protection to their owners, meaning that the shareholders are not personally liable for the company’s debts and obligations. However, corporations are subject to significant regulation and require a high level of administrative and legal compliance.

Why Is Business Ownership Important?

Entrepreneurship and business ownership play a critical role in the global economy. Small businesses are the backbone of many local economies, providing jobs and driving innovation and economic development. Moreover, owning a business can provide financial independence, personal fulfillment, and the opportunity to make a positive impact on society.

However, owning a business is not without its challenges. Developing a successful business requires careful planning and execution, as well as a deep understanding of the market, competitors, and industry trends. Moreover, business owners must be prepared to navigate a complex regulatory landscape and manage risks associated with legal liabilities and financial fluctuations.

Business ownership is an essential component of economic growth and provides individuals with the opportunity to create wealth, pursue their passions, and make a positive impact on their communities. However, it requires careful planning, preparation, and execution to succeed in today’s highly competitive market. In the following sections, we will provide a step-by-step guide to creating a successful business plan, including choosing the right ownership structure, conducting market research, developing a marketing strategy, and securing funding.

Sole Proprietorship

A. definition of sole proprietorship.

A sole proprietorship is a type of business ownership where the business is owned and operated by one person. It is the simplest and most common form of business entity in the United States. The owner of the business has complete control over all aspects of the company, including finances, operations, and decision-making.

B. Advantages of Sole Proprietorship

One major advantage of a sole proprietorship is that it is easy and inexpensive to set up. The owner does not have to file any formal paperwork or pay any registration fees. Another advantage is the flexibility that the owner has in running the business. Because there are no partners or shareholders, the owner has complete control over the direction of the business and can make decisions quickly and without any consultation.

A sole proprietorship also offers tax benefits. The owner of the business can deduct all of the business expenses from their personal income taxes. This can include things like office supplies, travel expenses, and even a portion of their home expenses if they work from home.

C. Disadvantages of Sole Proprietorship

While there are many advantages to operating a sole proprietorship, there are also some disadvantages. One major disadvantage is that the owner of the business is personally responsible for all of the debts and liabilities of the business. This means that if the business runs into financial trouble or is sued, the owner’s personal assets may be at risk.

Another disadvantage is that it can be difficult to raise capital for the business. Because the owner is the only investor in the company, they must rely on their own savings or loans from family and friends to fund the business.

D. Examples of Sole Proprietorship

Some examples of sole proprietorships include small businesses such as freelance writers, consultants, and hairstylists. These types of businesses are typically run out of the owner’s home or a small office space and require little investment to get started.

Another example of a sole proprietorship is a food truck vendor. The owner of the business is responsible for everything from purchasing the food and supplies to cooking and selling it to customers.

A sole proprietorship can be a great option for entrepreneurs who want complete control over their business and are comfortable with the risks that come with being personally responsible for its debts and liabilities. However, it is important to carefully consider the advantages and disadvantages before deciding if this type of business ownership is right for you.

Partnership

Partnership is a business structure that involves two or more individuals who share ownership and management responsibilities, as well as the profits and losses of the business. There are different types of partnerships, each with unique characteristics, advantages, and disadvantages.

A. Definition of Partnership

A partnership is a legal agreement between two or more persons who agree to carry on a business with a view to making a profit. The partners agree to share in the management of the business, as well as the profits and losses.

B. Types of Partnership

There are three types of partnership, including:

1. General Partnership

General partnership is the most common type of partnership, where all partners share equal responsibility and liability for the business. Each partner contributes to the capital and takes an active role in managing the business.

2. Limited Partnership

Limited partnership is a form of partnership where one or more partners have limited liability and do not participate in the day-to-day management of the business. They are called silent partners and only contribute capital to the business.

3. Limited Liability Partnership

Limited Liability Partnership (LLP) is a type of partnership where each partner is only liable for their own acts and not those of their partners. LLPs are common among professional service firms such as lawyers and accountants.

C. Advantages of Partnership

There are several advantages to forming a partnership, including:

Shared responsibility and resources: Partners can share responsibilities and resources, as well as leverage their respective expertise and networks to grow the business.

Pooling of funds and capital: Partners can pool their resources and capital to start and grow the business, which may be especially beneficial in cases where individual partners have limited financial resources.

Flexibility: Partnerships can be more flexible than corporations when it comes to management and decision-making, as partners have more freedom to make decisions and run the business as they see fit.

D. Disadvantages of Partnership

There are also some disadvantages to forming a partnership, including:

Unlimited liability: General partners have unlimited liability, which means that they are personally liable for the debts and obligations of the business.

Potential for disagreements: Partnerships can be challenging when partners have different goals, objectives, or work styles, which can lead to disagreements and conflicts.

Limited growth potential: Partnerships may have limited growth potential compared to corporations, especially when it comes to raising capital or attracting investors.

E. Examples of Partnership

Some examples of successful partnerships include:

Ben & Jerry’s: The famous ice cream brand was founded by Ben Cohen and Jerry Greenfield, who started the business as a partnership in 1978.

Hewlett-Packard: The technology giant was founded by Bill Hewlett and Dave Packard, who started the business as a partnership in 1939.

Limited Liability Company (LLC)

A. definition of llc.

A Limited Liability Company (LLC) is a hybrid business entity structure that combines the flexibility of a partnership with the limited liability of a corporation. LLCs have distinct legal personalities, which means that they’re separate from the owners, known as members. LLCs have become popular among small business owners, as they offer the benefits of both sole proprietorships and corporations.

B. Advantages of LLC

The advantages of forming an LLC include:

Limited Liability : Members of an LLC are not personally liable for the debts or obligations of the company. In other words, their personal assets are protected from any legal action taken against the LLC.

Pass-Through Taxation : LLCs are taxed as pass-through entities, which means that profits and losses are reported on the individual tax returns of the members. This can lead to lower tax rates, as well as the ability to deduct losses against other income.

Flexibility : LLCs are flexible in terms of ownership structure and management. Members can be individuals or other entities, and they can choose to manage the company themselves or designate a manager.

Simplicity : LLCs have fewer formalities than corporations, including fewer required meetings and less complex record-keeping.

C. Disadvantages of LLC

The disadvantages of forming an LLC include:

Limited Life : LLCs have a limited lifespan that’s determined by the operating agreement. This means that the LLC may need to dissolve if a member chooses to leave the company or dies.

Self-Employment Taxes : Members of an LLC are subject to self-employment taxes, which can add up to a significant amount.

State Requirements : LLCs are subject to state regulations, which can vary depending on where the company is located. This can lead to additional costs and paperwork.

D. Examples of LLC

Some examples of LLCs include:

LLC for Freelance Writers : A freelance writer could form an LLC to protect their personal assets and take advantage of pass-through taxation.

LLC for Real Estate Investors : Real estate investors often form LLCs to limit their personal liability and take advantage of tax benefits.

LLC for Family Business Owners : Family business owners can use an LLC to simplify their governance structure and protect their personal assets.

LLCs offer the benefits of limited liability, pass-through taxation, flexibility, and simplicity. However, they also have some disadvantages, such as limited lifespan, self-employment taxes, and state requirements. Depending on the needs of the business, an LLC can be a great choice for a business owner looking to protect their personal assets while enjoying the tax benefits of a pass-through entity.

Corporation

A corporation, also known as a limited liability company, is a legal entity that is separate from its owners. It has its own legal rights and liabilities, can own property, enter into contracts, and can sue or be sued.

A. Definition of Corporation

A corporation is incorporated under state law and is considered a separate legal entity from its shareholders or owners. This means that the corporation can own property, enter into contracts, and conduct business in its own name.

B. Types of Corporation

There are several types of corporations, including:

• C Corporations: These are the most common types of corporations and offer limited liability protection to shareholders. They are taxed as a separate entity and can issue stock to raise capital.
• S Corporations: These are similar to C corporations, but they have a special tax designation that allows them to avoid double taxation.
• B Corporations: These are businesses that are certified for their social and environmental responsibility in addition to their financial performance.
• Non-profit corporations: These are corporations that are organized for charitable or educational purposes and are exempt from paying taxes.

C. Advantages of Corporation

There are several advantages to forming a corporation, including:

• Limited liability: Shareholders are not personally liable for the corporation’s debts or legal issues.
• Ability to raise capital: Corporations can offer stock to raise funds for expansion or other business needs.
• Perpetual existence: A corporation can exist indefinitely, regardless of changes in ownership.

D. Disadvantages of Corporation

There are also some disadvantages to forming a corporation, including:

• Double taxation: C corporations are taxed as a separate entity, and then shareholders are also taxed on their individual income from the corporation.
• More administrative work: Corporations require more paperwork and recordkeeping than other types of businesses.
• Potentially complicated ownership structures: Corporations can have multiple shareholders and may involve complex ownership structures.

E. Examples of Corporation

Some well-known corporations include:

• Microsoft Corporation
• Coca Cola Company
• Amazon, Inc.
• McDonald’s Corporation

These corporations all have a large number of shareholders and have grown to become some of the largest companies in the world.

Cooperatives

A. definition of cooperatives.

Cooperatives are a type of business organization that is owned and controlled by the people who use its services or products. They are run on a democratic basis providing each member with an equal vote in the decision-making process.

Cooperatives may be formed for social, cultural, or economic purposes. However, the fundamental principles of cooperatives are that they are open to all people who share a common goal, who assume responsibility, and who participate in the business.

B. Types of Cooperatives

There are several types of cooperatives that may be formed. These include:

1. Consumer Cooperative

This type of cooperative is owned by the consumers who use its products or services. The purpose of a consumer cooperative is to provide high-quality products or services at a fair price to its members.

2. Producer Cooperative

A producer cooperative is owned by producers who share resources and expertise to produce and market products or services. This type of cooperative helps small-scale producers to compete effectively in the marketplace.

3. Worker Cooperative

A worker cooperative is owned and operated by its employees. The workers actively participate in the decision-making process and share in the profits of the business.

4. Housing Cooperative

A housing cooperative is a type of cooperative that provides affordable and sustainable housing for its members. Members own shares in the cooperative and have the right to occupy a unit within the housing facility.

C. Advantages of Cooperatives

There are many advantages of cooperatives, including:

• Democratic structure and decision-making process
• Shared expenses and risks
• Improved bargaining power
• Shared profits and benefits
• Enhanced sense of community and cooperation

D. Disadvantages of Cooperatives

Despite the benefits, cooperatives also have some disadvantages, such as:

• Limited access to capital
• Difficulty in attracting new members
• Time-intensive decision-making process
• Difficulty in retaining members and keeping engagement levels high

E. Examples of Cooperatives

Some examples of successful cooperatives include:

• Mondragon Corporation, a Spanish worker cooperative that is the largest in the world and has over 80,000 members
• The Co-operative Group, a British consumer cooperative that operates various businesses including supermarkets, funeral homes, and legal services
• Ocean Spray, an American producer cooperative that is owned by more than 700 cranberry farmers

Cooperatives can be a beneficial business ownership structure for those who share a common goal and are willing to participate actively in the decision-making process. However, they also have their limitations and may not be suitable for all types of businesses.

Franchising is a popular form of business ownership where one party, the franchisor, grants the franchisee the right to operate a business under their trademark, marketing, and operational support.

A. Definition of Franchises

A franchise is a legal agreement between the franchisor and the franchisee where the franchisor provides the franchisee with a proven business model to follow. The franchisee pays an initial fee and ongoing royalties to the franchisor in exchange for the use of the franchisor’s trademark, products, services, and operating system.

B. Types of Franchises

There are various types of franchises that a business can adopt. The most common include:

Product Distribution Franchise – This type of franchise allows the franchisee to sell a manufacturer’s products.

Business Format Franchise – This type of franchise provides the franchisee with complete guidance on how to run the business, including the operational system, marketing, training, and ongoing support.

Management Franchise – This type of franchise offers the franchisee the right to manage an existing business.

C. Advantages of Franchises

There are several advantages of owning a franchise, including:

• Established brand and reputation
• Proven business model
• Ongoing support and training
• Group purchasing power
• Shared marketing and advertising costs

D. Disadvantages of Franchises

Although franchising has many advantages, it also has some disadvantages, including:

• High initial franchise fees
• Ongoing monthly royalties
• Limited flexibility in decision-making
• Limited product offerings
• Restrictions on operations and marketing

E. Examples of Franchises

Some popular franchise examples include:

• McDonald’s – a fast-food restaurant franchise
• Subway – a sandwich and salad franchise
• 7-Eleven – a convenience store franchise
• Anytime Fitness – a gym and fitness franchise

Franchising is a business model that offers many advantages and disadvantages to potential business owners. Understanding the different types of franchises and their pros and cons is essential to determine whether franchising is the right business ownership option for you.

Choosing the Right Business Ownership

When starting a business, one of the most important decisions you’ll make is choosing the right business ownership. There are several types of business ownership, including sole proprietorships, partnerships, corporations, and limited liability companies (LLCs). Each type has its own advantages and disadvantages, and choosing the right one depends on a variety of factors.

A. Factors to Consider

The first factor to consider when choosing the right business ownership is the amount of control you want over your business. For example, if you want complete control over your business, a sole proprietorship may be the best option. On the other hand, if you want to share control with others and have access to additional resources, a partnership or corporation may be a better choice.

Another factor to consider is the level of personal liability you’re comfortable with. Sole proprietors and partnerships have unlimited personal liability, which means that personal assets can be used to pay business debts. In contrast, corporations and LLCs offer limited personal liability protection.

Finally, you’ll also want to consider your long-term goals for your business. For example, if you plan to take your business public, a corporation may be the best choice. If you plan to keep your business small and family-owned, a sole proprietorship or LLC may be a better fit.

B. Legal Requirements

Once you’ve determined the type of business ownership that best fits your needs, you’ll need to comply with legal requirements. Each type of ownership has different legal requirements, such as registering the business name, obtaining necessary licenses and permits, and filing the appropriate tax forms.

It’s important to speak with an attorney to ensure all legal requirements are met and to avoid any legal issues down the line.

C. Tax Implications

Different types of business ownership also have different tax implications. For example, sole proprietors and partnerships are taxed as individuals, while corporations and LLCs are taxed as separate entities. The tax structure you choose will affect how much you pay in taxes and the types of deductions you can take.

To ensure you’re taking advantage of all available tax benefits, it’s important to consult with an accountant or tax professional.

D. Funding Considerations

The type of business ownership you choose can also affect your ability to secure funding for your business. For example, corporations and LLCs have access to more funding sources, such as venture capitalists and angel investors. In contrast, sole proprietors and partnerships may have a harder time securing funding.

Before deciding on a business structure, it’s important to consider how you plan to finance your business and choose a structure that aligns with your funding needs.

Choosing the right business ownership is a crucial decision that should not be taken lightly. By considering factors such as control, personal liability, long-term goals, legal requirements, tax implications, and funding considerations, you can make an informed decision that sets your business up for success.

How to Create a Business Plan for Each Business Ownership

When it comes to creating a business plan, the process may differ depending on your type of business ownership. In this section, we’ll guide you through creating a business plan for each of the following types of ownership:

A.  Sample Business Plan for Sole Proprietorship

As a sole proprietor, your business is owned and operated by you alone. When creating your business plan, focus on your personal goals and objectives for the business, as well as its unique selling proposition. Here are a few key areas to include in your business plan:

• Executive Summary: A concise overview of your business, including its purpose, target market, and financial projections.
• Products/Services: A detailed description of the products or services you offer, including pricing and how they meet the needs of your target market.
• Marketing Plan: An overview of your marketing strategy, including how you plan to reach your target market, your budget, and your timeline.
• Financial Plan: A projection of your revenue, expenses, and profits for the first year, as well as a break-even analysis.

B.  Sample Business Plan for Partnership

As a partnership, your business is owned and operated by two or more individuals. When creating your business plan, it’s important to clearly define each partner’s role and responsibilities. Here are a few key areas to include in your business plan:

• Partnership Structure: A description of the roles and responsibilities of each partner, as well as how decisions will be made and profits will be split.

C.  Sample Business Plan for LLC

As an LLC (limited liability company), your business is owned by one or more individuals who are protected from personal liability. When creating your business plan, focus on your unique value proposition and the benefits of your LLC structure. Here are a few key areas to include in your business plan:

• LLC Structure: An overview of your LLC structure, including the roles and responsibilities of each member, as well as any operating agreements.
• Marketing Plan: A detailed overview of your marketing strategy, including how you plan to reach your target market, your budget, and your timeline.

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What is a Form of Ownership Business Plan?

A single person owns and runs a sole proprietorship, and this sole proprietor has the rights to profits and assets of the business. 3 min read updated on September 19, 2022

Many small businesses begin as sole proprietorships. A single person owns and runs a sole proprietorship, and this sole proprietor has the rights to profits and assets of the business. Debts and liabilities are also the responsibility of the owner. Sole proprietorships are a great way to begin a business since they require very little money.

When you own a business , you are only taxed once. A sole proprietorship is not taxed as much as other business types. One person is the owner, so disagreements with other owners don't happen. It's also easy to end this type of business.

Sole Proprietorship Advantages

There are many advantages to having a sole proprietorship. For example:

• This type of business costs the least and is simple to begin.
• The sole proprietor has total control over the business and can make decisions that are best for the enterprise.
• The sole proprietor owns all the income from the business and can reinvest or retain it.
• The money that the business makes goes directly to the owner's personal tax return.
• It's easy to end the business.

Sole Proprietorship Disadvantages

Disadvantages to having a sole proprietorship include:

• Any debts that form are the responsibility of the sole proprietor. All personal and business assets are at risk.
• They can only use money from consumer loans or personal funds to advance the business.
• It might be difficult to attract high-quality employees.
• Not all employee benefits are available in a sole proprietorship.

Sole Proprietorship tax forms are:

• Schedule SE: Self-employment tax
• Form 1040: Individual Income Tax Return
• Employment Tax Forms
• Schedule C: Profit or Loss from Business (also called Schedule C-EZ)
• Form 8829: Expenses for Business Use of Your Home
• Form 1040-ES: Estimated Tax for Individuals
• Form 4562: Depreciation and Amortization

To run a business of this type takes a special kind of person who can handle all the ins and outs of owning a business . The sole proprietor is completely responsible for all business decisions and raising money. Certain employee benefits cannot be completely deducted from the business's income. Sole proprietors need to be aware that some of the costs can be partially deducted later on taxes as an adjustment.

Partnerships

Another form of business ownership is a partnership. Two or more people can share the ownership of a business in a partnership. The law does not set apart partners and owners, just like proprietorships. With a partnership, there should be some kind of agreement so that both parties know what they are responsible for, as well as what each gets if the business were to end. The legal agreement should include who will make decisions, how profits will be distributed, how disagreements will be handled, how partners in the future will enter the business, and what the process is for partners being bought out.

Partners need to figure out how much each will spend on the business and the amount of time they will spend on the business. Partnerships can be formed with other individuals and businesses. It does not cost much to form a partnership, although tax and liability rules are different for partnerships. Think very carefully who to partner up with, since the entire company can be jeopardized if one partner makes a legal or financial mistake.

Partnership Advantages

Partnership advantages include:

• Partnerships are simple to start but take time to properly grow.
• The likelihood of successfully raising funds increases with partners.
• The money made from the business goes directly to the personal tax returns of all partners.
• Potential employees might be more interested in the business if they know they can become a partner in the future.
• Partners who have compatible skills can help a business grow.

Partnership Disadvantages

Partnership disadvantages include:

• Partners are responsible for each other.
• Partners must equally share all profits.
• Disagreements are likely because decisions are made together.
• Employee benefits are not all deductible on business-related tax returns
• The partnership is not guaranteed to last due to one of the partners leaving or dying.

There are several kinds of partnerships that can be chosen. One is a general partnership where everything is divided, which includes responsibility of management and reliability and loss or profit shared, unless otherwise noted in the initial agreement.

If you need help with a form of ownership business plan, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• What Is the Most Common Type of Partnership?
• Difference Between Sole Proprietorship and Partnership
• Advantages and Disadvantages of Sole Proprietorship
• What is a Sole Proprietorship
• Sole Proprietorship vs Partnership
• Partnership Advantages and Disadvantages
• Can Sole Proprietorship Have 2 Owners: What You Need to Know
• Define the Term Business Ownership: What You Need to Know
• Proprietor Check
• Different Types of Companies and Their Advantages

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10 Types of Business Ownership (+Pros and Cons of Each)

Before starting a business, pick the best ownership model that fits your needs. Business ownership types are not created equal. They all have unique benefits and limitations that make them suitable for some situations and bad for others.

Are you better off as a sole owner, or do you want to share ownership rights with others? How do you want to pay your taxes? Are you open to sharing ownership with other partners?

Read on to learn the differences between different ownership styles and choose the best one for you.

Comparison of Different Business Ownership Styles (Winners & Losers)

10 Common Types of Business Ownership for Starting Entrepreneurs

Business ownership is the structure that determines who owns an organization. Every business has at least one owner with the legal right to dictate how the company operates.

The ownership type you choose impacts how your business can run and what it can do. Your choice determines how much external funding your business gets from investors and tax deductions.

Do you know 51.4% of business owners in the United States of America (USA) are men, while 48.6% are women?

Here are 10 common forms of business ownership, including their benefits and limitations.

1. Sole Proprietorship. Perfect Ownership for Low-Risk Small Businesses.

A sole proprietorship is the simplest form of business owned by an individual. Many individuals use this legal structure because it is easier and cheaper to start than others.

Sole proprietors don’t require the approval of a director board or partner for any business-related decision. They can decide what happens to the business assets, hire and sack employees, and make all vital decisions.

Although it gives absolute power to the owner, a sole proprietorship has some disadvantages. It is not a separate legal entity, which means the owner is liable for business actions.

A court can order creditors to confiscate the owner’s personal assets if the sole proprietor fails to pay the debt.

A sole proprietorship records profits and losses on the owner’s personal tax return. The business does not pay tax, but the owner pays personal income tax on business profits.

There is no legal requirement for you to open a sole proprietorship. As soon as you start a small business, it falls under this category. However, you must register the business name if you want to use another name except for your legal one.

Depending on your locality and business type, you may need to get a license and any necessary permit.

Examples of sole proprietorships include:

• Independent contractors like freelance writers, digital marketers, web developers, graphic designers, business consultants, plumbers, and virtual assistants.
• Business owners such as fitness coaches and daycare operators.

Pros of Sole Proprietorships

• Easy to Set Up: Creating a sole proprietorship is relatively easy and cheap. The maximum requirement is to register your business name if you are not using your own.
• Pass-Through Taxation: The business profits and losses go directly to the owner’s personal tax returns. This tax structure prevents double taxation.
• Total Control Over the Business: The sole proprietor makes every major and minor decision. You can make decisions about running the business without permission from other owners.
• Easy Liquidation of Assets: If the sole proprietor dies, the next of kin will have no issues liquidating the business assets. There are no external partners to oppose the decision, which makes the process easy.

Cons of Sole Proprietorships

• High Legal Risks: The sole proprietor has to answer any lawsuit against the business because the law recognizes the business and the owner as a single entity. This can lead to the loss of personal assets.
• Difficulty in Raising Funds: Sole proprietors face challenges raising funds and obtaining loans. Thankfully, small business loans without credit checks offer sole proprietorship funding with fair interest rates.
• Difficult in Selling the Business: Selling a sole proprietorship is hard. In most cases, the business is usually small and has few assets, which makes it less attractive to potential buyers.
• Business Death after Owner’s Demise: If the owner dies, the business may quickly follow suit, except there is a succession plan.

2. Partnership. Best Ownership for Business Partners.

A partnership is a business collaboration involving two or more owners. There is no partnership with one person in the picture. This business entity supports up to 100 owners.

Every individual partner signs a partnership agreement to make the business official. This document contains every necessary detail: the partner's rights, shares, capital contribution, and individual responsibilities.

Examples of businesses that often operate as partnerships include law, accounting, and real estate investment firms.

There are three types of partnership: general partnership, limited liability partnership, and unlimited liability partnership.

• General partnership is a business ownership type where two or more partners share responsibilities for all business activities. The general partners actively manage the daily affairs of the business and are liable for the business actions of every partner.
• Limited Liability Partnership: This type of partnership prevents other partners from losing their assets because of another partner’s actions. In other words, if someone sues a partner for debt, other partners’ assets can not be part of the settlement.
• Unlimited Liability Partnership: This partnership has an unlimited personal liability, where every partner is responsible for the business actions. If the company owes debt beyond what it can pay, every partner can lose personal assets.

Pros of Partnerships

• Access to Partners Knowledge: Remember the famous adage “two heads are better than one?” Now imagine the contributions three or more partners can add to a partnership.
• Easy to Set Up and Run: Don't let the term partnership give you a complex view of the business structure. Setting up and running the day-to-day operations of a general partnership is easy. The requirements are registering your business name and signing a partnership agreement.
• Better Fundraising Capacity: Raising capital among partners is a viable way to generate funding for business operations. Every partner contributes financially to keep the business running.
• Division of Labour: In a general partnership, every partner participates in day-to-day business operations, while in a limited partnership, they do not.

Cons of Partnerships

• Unlimited Liability: In a general partnership, every partner gets affected by the losses or liabilities of the organization. It doesn't matter who caused it; they all share the business liabilities.
• Lack of Autonomy: Since the business belongs to more than one person, every major decision needs the approval of every partner. For example, if the partner in charge of marketing wants to run a new campaign, every partner has to agree.
• Potential Conflicts: Since it involves multiple partners, conflicts can arise when partners disagree on vital decisions.

3. Limited Liability Company. A Perfect Type of Ownership for High-Risk Small Businesses.

A limited liability company combines the best features of a sole proprietorship and a corporation. Owners get the flexibility and pass-through taxation benefits of a sole proprietorship or partnership and the liability benefits of a corporation.

This business ownership style is ideal for small businesses with significant risks. It is easier and cheaper to form than a corporation while offering the same liability protection. If your company goes bankrupt or gets hit by a lawsuit, your assets do not contribute to any settlement.

However, liability protection doesn’t cover situations where your personal negligence causes the business to lose or affect another party.

For example:

• LLC owners are liable if they personally serve as a guarantor for a business loan and the company fails to pay.
• If they engage in fraudulent or illegal activities through the LLC.

An LLC offers the flexibility to choose how you want to pay taxes. Like sole proprietorship, the company’s profits and losses pass directly to owners, and they file them in their personal income tax returns. In addition, owners can choose to pay corporate taxes like a corporation.

LLCs, using the default pass-through taxation, pay their owners through profit distribution. But for those that use the tax system of a corporation, owners get a fixed salary.

To register an LLC, you must have at least one owner. There is no limit to the number of owners that can form an LLC. However, if you choose the tax structure of an S-corporation, you can have no more than 100 members.

The most important legal documents for forming an LLC are articles of organization and operating agreement.

Examples of well-known limited liability companies include Sony, Blackberry, Anheuser-Busch, Domino's, and Nike.

Pros of Limited Liability Companies

• Limited Liability : Shareholders can’t be held personally liable for the LLC’s actions because the law recognizes it as a separate legal entity. In the event of a lawsuit, only business assets can form a part of the settlement.
• Tax Options: LLC makes it possible for the owners to choose how they want to pay taxes. Owners can decide their tax status, either through pass-through taxation or directly as a corporation.
• Credibility: Unlike sole proprietorship and general partnership, an LLC is a business entity that separates the owner from the company. This characteristic makes the LLC look more reliable to consumers and investors.
• Simplicity: An LLC is easy and less expensive to form compared to a corporation but more complex than a sole proprietorship. Maintaining an LLC is simple, and there is no requirement for you to set up a board of directors.

Cons of Limited Liability Companies

• Difficulty in Raising Capital: Raising funds from external investors can be a struggle as an LLC, as it does not offer stock options like a corporation.
• Limit to Personal Liability Protection: Although an LLC offers its members liability protection, it does not protect them from the consequences of their actions in a lawsuit.

4. Private Corporation. Type of Ownership for Large Family-Owned Companies.

A private corporation is a unique business ownership type owned by a small number of shareholders. Shares are not open to the general public. You can’t trade its shares on any public stock exchange. Only a select group of shareholders can own and exchange shares.

This type of corporation is suitable for large family-owned businesses. Examples of companies that use this ownership style include Koch Industries, Deloitte, Cargill, and Albertsons.

A privately held corporation is not under any obligation to disclose its financial information to the general public. It doesn’t have to file its financial reports with the Securities and Exchange Commission (SEC).

Different countries have limits on how many shareholders a private corporation can have. In the United States, the maximum number of shareholders is 2,000.

In Australia, the maximum is fifty (50) non-employee shareholders. The number of shareholders can be more than 50 if you have employees owning shares in the corporation.

Starting a private company requires articles of incorporation. Here, you state your shareholders’ names and the number of shares they own.

Pros of Private Corporations

• Financial Privacy: A private corporation doesn’t have to release finance details to the general public. If it makes a huge profit or loss, it can keep its records in-house.
• Fast Decision Making: With a small number of shareholders, it is easier to make business decisions.
• Limited Liability: This business ownership protects stakeholders' assets from being seized if the company experiences a loss.
• Exchange of Shares: In privately held companies, only internal shareholders can own, buy, and sell shares. This structure is ideal for family-owned businesses that want to keep ownership within the family.

Cons of Private Corporations

• Long Registration Process: Registering a privately held company is expensive and takes longer to set up than a sole proprietorship and a partnership. A verbal agreement is not sufficient to establish a private corporation. You have to submit the articles of incorporation in the state the company operates.
• Fundraising Restriction: Owners can’t sell shares to the public to raise funds. This restriction can affect the growth of the company.

5. Nonprofit Corporation. Best Business Ownership for Nonprofits.

A nonprofit corporation is a non-ownership structure formed to serve society. Unlike other businesses, its primary objective is not to make profits but to serve the public good.

Even when it makes profits, it reinvests it in its mission. Examples of nonprofit corporations include charitable, scientific, educational, religious, health, animal, human rights, and cruelty-prevention organizations.

Breakdown of Categories for Nonprofit Organizations

The most striking advantage of the nonprofit corporation is that it enjoys tax-exempt status.

Because of its unique structure, nobody can own a nonprofit corporation. But what about the people who start it? They have no ownership but can be a part of the board of directors or trustees running the nonprofit.

However, it is illegal for the board of directors to run the nonprofit in a way that generates profits for individuals. The nonprofit is accountable to the general public, government agencies, and the country’s tax body.

Setting up a nonprofit organization requires registering a name, forming a board of directors, filing articles of incorporation, and applying for tax-exempt status.

Examples of nonprofit organizations include The Bill and Melinda Gates Foundation, Habitat for Humanity, Red Cross, and Amnesty International.

Pros of Nonprofit Corporations

• Limited Liability Protection: The nonprofit is a separate legal entity from its founders. They enjoy personal liability protection from the nonprofit’s actions.
• Tax Exemption: Nonprofits can get a tax exemption status from the government. This tax classification prevents them from paying any tax.
• Grant Eligibility: Nonprofits carry out charity work and are eligible to apply for grants from various organizations, private sponsors, and governments.

Cons of Nonprofit Corporations

• Lots of Paperwork: Starting a nonprofit corporation requires you to fill in too much paperwork. The board of directors also has to keep annual records.
• Limited Activities: A nonprofit corporation can only focus on not-for-profit activities. Membership of the board of directors is usually voluntary. However, members can deduct expenses incurred while carrying out their duties. Some nonprofit corporations may pay their board members, but the paid individuals can lose the protection offered by nonprofits.
• Limited Access to Funding: Getting funds to execute vital projects can be a challenge. A nonprofit corporation primarily relies on grants and charitable contributions from individuals.

6. Benefit Corporations. Best Ownership Type for Social Entrepreneurs.

A benefit corporation combines the benefits of nonprofit and profit-oriented organizations. This ownership style focuses on making positive social impacts while making profits.

Entrepreneurs who want to make social and economic impacts find this ownership style the most suitable. An example of a social entrepreneur is Blake Mycoskie, founder of TOMS Shoes. For every pair of shoes the company sells, it donates a pair.

The same as a typical corporation, it has shareholders and a board of directors running its affairs. However, while the corporation focuses exclusively on making profits for its shareholders, it places equal attention on promoting the public good.

A benefit corp doesn’t enjoy tax exemptions like a nonprofit. It can choose to subject itself to a corporate income tax like a C corp or not pay it like an S corp.

There is no limit to the number of shareholders a benefit corporation can have. However, if it uses an S corp tax status, it can only have a minimum of 100 shareholders.

The rules for forming a benefit corp vary by state. You need to file articles of incorporation stating its general benefit goal. Some states may require you to publish annual reports accessed by a third party to prove you are true to your social impact goals.

Another way to form this business ownership type is to get your existing corporation certified as a B corp. The requirements are stringent. You have to take a B Lab Impact Assessment every 3 years and pay B Lab fees ranging from $500 to $50,000 annually.

Examples of well-known benefit corporations include Patagonia, Plum Organics, King Arthur Flour Company, and Kickstarter.

Pros of Benefit Corporations

• Social Impact: This ownership structure is attractive for many business owners because it allows them to make profits and contribute to the public good.
• Attracts Investors: Benefit corps attract investments from people who want to earn a profit and make a social impact.
• Profit Distribution: Every shareholder is liable to receive a part of the organization's profits as dividends.
• Limited Liability: Shareholders are not personally liable for any legal claims or losses the business incurs.

Cons of Benefit Corporations

• Expansive Reporting Requirements: A B corp tenders its financial and social impact reports to stakeholders and regulatory bodies annually.
• Expensive to Run: Your corporation has to pass an evaluation process to become a benefit corp. However, if you want to turn an existing corporation into a B corp, you must pay a yearly fee. The annual certification fee ranges from $500 to $50,000 annually.
• Tax Requirement: Unlike a nonprofit, a benefit corp pays taxes for doing social impact work. Since it is a for-profit organization, it does not enjoy a tax-free status.

7. Close Corporation. Suitable for Small Family-Owned Businesses.

A close corporation is owned and run by a select number of shareholders that share close business ties. It can operate as a partnership where shareholders and directors play an active role in the daily management of the corporation.

Like a private corp, the close corporation can’t publicly trade its shares. Only its members at incorporation can buy and exchange shares.

A close corporation is free from the requirements of publicly-traded organizations. It does not need to create a board of directors, submit annual reports, and hold yearly shareholders meetings.

Small family-owned businesses use this structure to keep ownership within close family ties and escape the operational requirements of a corporation.

State statutes govern the activities of close corporations. Some states do not recognize it. Requirements for close corps vary from one state to another. For example, Arizona allows up to 10 owners, while California supports up to 35.

The basic requirements for setting up a close corp are a written shareholder agreement and certificate of incorporation.

Examples of close corporations include Deloitte, H-E-B, Publix Super Markets, and PricewaterhouseCoopers (PwC).

Pros of Close Corporations

• Operational Flexibility: A close corp has fewer rules to follow. Apart from following the written shareholder agreement, owners can run the corporation without complying with strict corporate regulations.
• Limited Liability Protection: Like a typical corporation, shareholders enjoy liability protection from the company’s debts.
• Freedom from Outside Pressure: This corporation is strictly exclusive to a select group, preventing pressure from external shareholders.
• Easier Decision-Making: Business owners in a close corporation enjoy more freedom over their operations. They can make business decisions such as buying new equipment without seeking the board of directors’ approval.

Cons of Close Corporations

• Not Widely Recognized: Some states do not allow the formation of close corporations.
• Taxation: Close corporations are subject to double taxation. However, you can get an S corp tax status to prevent this problem. Also, many close corps don’t pay members dividends to avoid double taxation.
• Restricted Capital: The capital needed to run a close corporation comes from its owners. Since you can’t publicly sell shares to raise funds, it may limit your ability to expand as a corporation.

8. C Corporation. Best Ownership Style for Raising Business Capital.

A C corp is a publicly traded company that can accommodate unlimited shareholders. Owners can sell their shares on a publicly-traded stock exchange to generate more business funds. C corp is the best option for attracting investors and business capital.

A C corporation taxes shareholders separately from the company. It pays income tax on its corporate profits. Shareholders also pay personal income tax on their dividends. Top companies like Microsoft and Walmart use the C corp designation for federal income tax purposes.

Like other corporation types, a C corp provides shareholders with personal liability protection from business debts and lawsuits . In the event of bankruptcy or debts, shareholders’ assets are untouchable.

Forming a C corp involves:

• Filling out an article of incorporation document in your state.
• Appointing a board of directors.
• Drafting the company’s bylaws.

Pros of C Corporations

• Access to Funds: A C corporation raises money by selling stock to individuals, companies, and other organizations.
• Limited Liability: Shareholders are not liable for the corporation’s legal obligations. They enjoy protection on their assets if the company faces a lawsuit or has to pay the business debt.
• Tax Advantages: This corporation qualifies for many tax advantages, such as personnel and rent tax deductions. The deductions can apply to wages, health, and retirement benefits.

Cons of C Corporations

• Double Taxation: C corps pay income tax at the federal and state levels on its earnings. Shareholders also have to pay personal income tax on the dividends paid by the corporation. You can escape this problem by reinvesting dividends into the company.
• High Setup and Running Cost: Running and maintaining a C corporation is not cheap. Corporations are generally expensive to form and run. The average cost of creating a C corporation is around $633. This estimation covers one-time accounting and legal fees.

9. S Corporation. Best Ownership for Small Businesses with Complex Operations.

An S corporation passes its profits and losses directly to its shareholders for tax purposes. It got its name from the Subchapter S of the Internal Revenue Code.

S corp can't have more than 100 shareholders. It can only offer shares to individuals, trusts, and specific tax-exempt organizations. Corporations and partnerships cannot own their shares.

S corps are attractive to small business owners who want to enjoy the benefit of a corporation but want to escape its double taxation. The company does not pay federal and state income taxes. Instead, shareholders pay personal income taxes on their dividends.

Setting up an S corporation requires you to choose a business name, file articles of incorporation, and S-Corp election paperwork with the IRS.

Pros of S Corporations

• No Double Taxation: Unlike other stock corporations, an S corp does not pay corporate income taxes. However, the IRS mandates that it pays shareholders a reasonable salary even when it doesn’t record a profit. Owners pay personal income tax on their earnings.
• Limited Liability: Shareholders, directors, and employers enjoy personal liability protection from the corporation’s debts and actions. If creditors sue the corporation, owners’ personal assets have protection.

Cons of S Corporations

• Limited to Issuing Common Stock: A S corp can only issue common stock that gives shareholders voting powers and ownership rights. It can’t have more than 100 shareholders. This limit can affect its fundraising ability.
• Expensive to Startup: S corporations are costly to start up and maintain effectively. If you want to start this business ownership, be ready to invest significantly.

10. Cooperative. Best for Individuals and Businesses with Similar Interests.

A cooperative is a privately-owned organization of like-minded business owners that pool resources together for its members’ advantage.

Other business structures allow owners to own a part without using its products. However, with a cooperative, members are its primary customers.

A cooperative is run like a democratic society. Every member actively participates in the decision-making process. They elect officers and members of the board of directors.

Business owners create cooperatives to reduce costs through bulk buys and sharing employees and wages.

Cooperatives can accommodate an unlimited number of shareholders. The minimum number of members it can have varies by country and business type.

Because of its many members, it appoints a board of directors to directly manage its day-to-day running.

A cooperative pays tax like other for-profit business owners but enjoys special tax treatment. It can pay its members patronage dividends to lower its taxable income.

Examples of cooperatives include Sunkist, Ocean Spray, Cabot Creamery, The Associated Press, Home Hardware, and Associated Wholesale Grocers.

Pros of Cooperatives

• Unity Among Members: Members of a cooperative are united for a common goal. The projects it wants to achieve serve as an anchor that brings all the members as one.
• Access to Funding: Raising funds and capital to execute projects comes relatively easy. They can raise funds via member contributions and investments. The organization is also liable to receive grants and can house an unlimited number of shareholders.
• Lower Corporate Tax: A cooperative can get special deductions for expenses. Also, the money it pays members as part of their benefits is free from corporate tax.

Cons of Cooperatives

• Bureaucracy in Decision-making: Coming to a consensus about decisions is not a walk in the park with cooperatives. Due to multiple shareholders, it's not always possible to have a general agreement.
• Corruption: If the leaders are corrupt, funds will get misused, resulting in losses for shareholders.

Choose The Best Ownership Type For Your Business

Before choosing the best ownership type for your business, consider the benefits and disadvantages of different options. You have to consider the following factors:

• Vision: What are your long-term business goals?
• Mission: What is your business purpose?
• Size: How many partners or shareholders would you be willing to work with?
• Expansion Plans: How large or quick do you intend to expand, and what locations do you have in mind?
• Funds: How do you intend to fund your business?

Answer these questions before making a decision. If you are still having difficulties, consult an attorney for help. However, note that hiring an established business lawyer is costly.

Luckily, there are reliable online legal service providers to help you pick suitable business ownership. In addition, you can get legal assistance to properly file your taxes and set up your business entity.

If you want to learn more about starting and running a profitable new business, here are other Founderjar articles that can help.

• 5 Common Types of Business Structures (+ Pros & Cons)
• 13 Best Countries to Start a Business
• How to Write a Business Plan in 9 Steps (+ Template and Examples)
• The Best Tools to Start Your Online Business
• 12 Key Elements of a Business Plan
• How to Start a Consulting Business in 2023
• Business Owner Demographics and Statistics in the US
• C Corp Cost

Image Credit: Image by iconicbestiary on Freepik

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Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

More From Forbes

Basic structure of a business plan for beginners.

• Almost 50% of all new business make it through.
• Founders who have failed at a prior business have a 20% chance of succeeding versus an 18% chance of success for first-time entrepreneurs.
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According to Small Business Trends , a  third of small businesses get started with less than $5,000, and 58% got started with less than $25,000. 26% of business owners started because they were willing to be their own boss; 23% because they wanted to pursue their passion and 19% because the opportunity presented itself. Other reasons to start varied from being not ready to retire to dramatic life events such as divorce or death. 

Out of all small businesses   started in 2014, 80% made it to the second year (2015). 70% made it to the third year (2016). 62% made it to the fourth year (2017), and 56% made it to the fifth year (2018). A bit more than half of all startups actually survive to their fourth year. As of then, the startup failure rate is about 44%.

When it comes to the main reasons for failure, 42% of them fail because of a lack of market needs; 29% due to lack of cash and 23% because they hire the wrong team. 19% get  outcompeted or face pricing/cost issues and 17% because of un-friendly product or lack of a business model. Poor marketing and relationship with costumers also have an impact on 14% of unsuccessful ventures. 

If we read between the statistics, there is room for hope. Almost 50% of all new business make it through. And  82 % of successful business owners didn't doubt they had the right qualifications and proper experience to run a company.

Statistics  indicate that experience plays a role in the success of a business enterprise. Founders of previously successful business   have   a 30% chance of success with their next venture. Founders who have failed at a prior business have a 20% chance of succeeding versus an 18% chance of success for first-time entrepreneurs.

However, successful entrepreneurs are increasingly  encouraging  new generations to start a business  as soon as possible .

"Start as soon as you can: you can learn as you go and you have nothing to lose," says Filipa Neto, managing director of  Chic by Choice . " I have a three-skill motto: preparation, persistence, and no fear of failure. And preparation can come from everywhere."

All experienced entrepreneurs had to start from somewhere. One place where to start from is the beginning: the business plan . This is the basic structure you can follow when you do not know how to go about it.

1. Cover page

Small but important, it should include the name of the business and your name and contact information.

2. Table of Contents

It should allow readers to quickly skim or flip through to get to the included topic they are most interested in.

3. Executive Summary

Brief and formal explanation of what your company is, how far is going to reach, and why it is going to be successful. In no more than one page, it should include the mission statement, the description of the industry and the market environment, an explanation of its uniqueness as well as competitive advantages. The financial potential and anticipation of risks, the core team and the stage of the business, especially for those ones that are not starting from scratch, are also vital. Finally, the capital that is requested should be concise and clear.

4. Business Description

An in-deep overview of the proposed venture. The final aim is to make potential investors quickly grasp the concept of the business and its value proposition.

5. Industry Background

Provide past and current data about the shape, size, trends, and critical features of the industry you are trying to get in. What is the industry? What is the industry outlook? Who is competing in this industry? What are the industry's barriers to entry?

6. Competitive Analysis 

Look at current and prospective rivals and competitors. Who are your competitors?  Which are your competitors' strengths and weaknesses? What distinguishes your business from theirs? What is the competitive outlook for the industry? 

7. Market Analysis

Focus on your customers, their likes, needs, and demographics. The aim is to demonstrate that there is really an opportunity for your venture in the market.

8. Management Summary

Introduce your team and the description of how are they going to rock it together. Every business is a risk, especially when there are no precedents to evaluate. This is why the knowledge, skills, and ability of the team to work together as a capable unit, is one of the first elements that would be evaluated by possible investors. Friends and family, despite their love and trust in us, are not always the wisest choice.

9. Operations Plan

Focus on the daily business activities and the strategies that will support them. With the use of charts, graphs, or tables, you can show complex information such us your breakeven point, your sources of supplies or your manufacturing and distribution process.

10. Marketing plan

Or the detailed strategy of how are you going to sell your product or service. Focus on the opportunity that your business is bringing, and the costumer's buying behavior a re primary considerations of a successful marketing strategy.  Closely followed by s potting the value that each customer is bringing to your business.

11. Financial Plan

The current and future projections of your business financial performance. In short, every financial plan should focus on the following key components. The capital requirements should reflect on how much money you need to raise, how are you going to use the money or how much you need from investors. Assumptions in terms of growth or internal components of your business should always be backed with strong evidence and experts opinions.  The income statement as the forecast of your business for the coming three to five years and the balance sheet generally prepared by your accountant. And finally, the cash flow statement showing weather your company is successfully turning its profits into cash.

12. Attachments and milestones

And all those additional documents that can provide valuable, additional information to the business plan.

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Your Business Plan: Ownership & Organizational Structure

Episode 008 of the start a brewer podcast.

This episode covers one of the most obvious and essential initial topics in Ownership and Organizational Structure. Yes, you need to explain your decisions and the resulting organizational outline in your business plan, but the importance of this gets into tax implications, decision making for the company, succession planning, following legal guidelines for investors, etc. And as Mary points out during this episode, you need to know your partners well, because you’re going to spend a lot of time together and you need to be on the same page.

Mary Brettmann, CPA, President,  Beverage Business Builders

Mary holds an active CPA license in Minnesota and California & has 25+ years of experience in the corporate world. In prior lives, she has been a state auditor, a sales controller, an international treasury professional, a business owner and finally a craft brewing CFO for a fast growing regional craft brewery. Mary’s current mission is to teach the industry what she’s learned and to help people get to the next level in their journey. And so in 2015 Beverage Business Builders was born. Mary calls Minnesota – and now California –  home, but has clients all throughout the country.

Jeff Mendel, Partner/Director,  Left Hand Brewing Co.

Mendy, aka Jeff Mendel, is one of the original owners of Tabernash Brewing Co, which merged with Left Hand Brewing Co. in 1998. Mendy has been on the Board of Directors for Left Hand since that time in addition to being fully immersed in all things with the Brewers Association. He is currently on the Events Committee for the BA, was co-Founder of the Colorado Brewers Guild, has been the Director for the Institute for Brewing Studies, and Director of the Microbrewers Conference and Trade Show among other leadership roles in the industry.

Jeffrey O’Brien, Attorney/Partner,  Chestnut Cambronne PA  

Jeff O’Brien is a partner with the law firm of Chestnut Cambronne PA, practicing in the areas of business and real estate law.  He represents several craft breweries and distilleries, helping them with financing issues, real estate matters, the launch of their businesses, intellectual property protection, operational issues and all of their other legal needs.  He is a frequent commentator on issues pertaining to liquor law. Jeff is licensed in the States of Minnesota, Wisconsin, Iowa and South Dakota.

About StartABrewery

StartABrewery is a collaboration amongst a fun group of craft beer industry veterans who are often invited to speak at beer business / brewing education programs. Each has offered to share their knowledge and experience to support the craft beer community as a whole by helping fledgling breweries in planning.

Conceived and coordinated by Candace L. Moon, The Craft Beer Attorney, and Laura Lodge of  Customized Craft Beer Programs, StartABrewery is provided as an educational resource for those dreaming of opening a brewery, those who are taking steps to make their dream a reality, and those who are opening their brewery doors and living it.

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