1. The three major forms of business ownerships:
a. Sole Proprietorship- the simplest form but the riskiest form of a business. You do the business under your name or a trade name. You have the advantages of little paperwork, taxes are on your personal return, and profits and losses come out of your own pocket. You make all of the decisions.
Although, you may be ineligible for tax-free fringe benefits and have to file under a fictitious name. b. The Partnership- Almost runs the same as a sole proprietorship but it has 2 people. They have general and limited partnerships. Having a general partnership means that creditors can collect from all partners’ personal assets as well as the business assets. You can have a formal written partnership that explains all the specifics or you can have an “at-will” partnership with only a oral understanding. There are “default” terms for this and it can be terminated at any time. A Limited Partnership means that members who are not part of management can limit the losses they are liable to. Every Limited partnership must have one personally liable general partner. c. The Corporation- A corporation is a common form or business in the U.S. They require a lot of complex legal paperwork Creditors cannot collect their personal assets, only corporate if there is any. There are also “S” Corporations which pay one tax if they meet certain conditions and the “C” Corporation which pay taxes at corporate and shareholder levels.
2. Pro’s and Cons between all 3 forms of business ownership:
a. Pro’s of a sole proprietorship are that it is simple, you make all the decisions, has little paperwork and taxes are your personal returns. Cons are that it is the riskiest form of ownerships, you must do the business under your own personal name or a trade name, and losses come out of your pocket. b. The Pro’s of a Partnership are that there are general and limited ownerships to choose from, you have a written partnership that goes over all specifics, and you can limit the losses you are liable to. The Cons would be that it might be only an oral understanding if it is “at-will” and your partnership can be terminated at anytime. c. The Pro’s of a corporation are that creditors cannot collect any personal assets. The cons are that there is a lot of legal paperwork that must be filed, and that corporate profits are taxed twice, investors pay personal income tax on remaining profits.
3. The Steps to set up a Business in New York City
NYC requires certain businesses and individuals to obtain a special regulatory license or permit before opening and some may also require a Privilege Tax License. It is mandatory to prove that you have the legal right to work in the U.S. and have a background check. You will have to register with the state.
You must visit this website in order to get help with a loan or grant program if needed. This whole website is NO COST service that will guide you through the process of launching your business. You can also use NYC Business Express which will help you find regulations in the area of your business as well as government incentives and managing your relationship with the city.
A good resource for example business plans: www.bplans.com
Most business loans are collateralized by existing assets, meaning if you want a $50,000 loan you must be certain that you own $50,000 worth of collateral to back it with.
You must also make sure you have a lawyer, a banker, an accountant…