How to Decide What Structure Is Best for Your Business?

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

LIABILITY

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

TAXES

Pass-Through Taxation

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

Corporate Taxation (Double Taxation)

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

CREATION

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

Experienced Business Attorneys can assist in choosing the business structure that will benefit you and your business.

Increasing Your Business Through Networking

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

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

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

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

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

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

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

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

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

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

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

  • Patience: the fact that it takes time to build relationships with members of the chapter and to get to understand their business helps you grow more patient about the realization of your ambitions. You could use time to your benefit.
  • commitment: at BNI you learn to stick to your desire until you see it materialized.
  • Learning new things: you are exposed to new knowledge, new businesses and therefore are presented with opportunities to probably make new choices.
  • Low cost advertising: you do not need to spend much money to organize advertisement or run public relations for your business. Your fellow networking members have become the voice for your business.

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

Contents Insurance for Your Business

If you run a business one of your biggest concerns will be your business property.

Unfortunately many a small businessman has been awoken at night by intruders in his shop below or by the remote office premises alarm phoning his mobile at four in the morning.

As a business person your property will always be at risk. Fortunately business property contents insurance is available which will cover all risks to which an enterprise large or small, may be exposed. This insurance cover is available either to business property tenants or lease-holders or to owner occupiers who keep business contents at the premises.

One of the largest risks to business property is from theft and in particular the business property contents.

Thieves though rarely known to steal buildings but regularly attack commercial premises for the contents.

Consequently, a business contents insurance policy will be rated for theft on two major counts.

Primarily the location of the building where the contents are kept. If you run your business in a high risk theft area as defined by the insurance company statistics, then you pay a lot more to protect your business possessions.

Secondly the cost of covering your businesses tangible assets is determined by the value of the property kept at the business premises. If you keep stock or equipment that is considered a high risk for theft, then the premiums quoted will reflect this.

High risk stock items include goods which are easily portable and can be resold for cash, including audio, video and television equipment, cigarettes, cigars and tobacco, designer clothing, computers and digital equipment and software, computer games, drugs, pharmaceuticals and medicines, precious metals and jewellery, mobiles, telephones and radios, cameras, photographic equipment, power tools,DVDs, CDs, trophies, wines, alcohol and spirits. If your business premises contains any of these items you will need to calculate the total value of each when applying for cover.

All content insurance polices for commercial insurance will ask you to declare the replacement value of all the goods on the property. Usually the total value is divided into sums insured, in separate sections for business equipment like tables and chairs, computer equipment, electrical equipment, filing and data, business stock, high risk stock, machinery and all other property.

Many small business insurance policies provide provision for contents insurance for all types of buildings and businesses, however some for some risks the policy may be issued subject to conditional clauses.

Depending upon the location of the premises a business insurer may well impose tough restrictions as to the storage and security of the property and its contents. This may include approved alarms, CCTV, security patrols, window grills and bars, and certain types of locks, all of which will also help to keep the premium costs down as they attract large discounts if fitted.

Business contents insurance policies also contain provision for all material damage and loss caused by a long list of perils, including fire and flood. Some companies may put restrictions upon the policy if your business postcode is in a known flood risk area.

Contents insurance for small business is usually sold as a package offering all risks cover for a particular property type. Cover is widely available from numerous online insurance company offerings and price comparison sites. Typical small business contents insurance packages are available online for shops, office, pubs, hotels, restaurants, surgeries and most home based businesses.

Contents insurance packages for small business usually include a range of additional or optional covers which protect the contents from other risks. One such cover is Business interruption insurance which protects gross profits of the company if the stock or contents are destroyed. Another frequently available is Goods in transit cover which protects a businesses goods and contents away from the premises, in transit either to or from the place of work or delivery

Larger enterprises with multiple risk addresses and high value contents will need to seek the services of a business insurance broker who can advise on the appropriate covers required for the enterprise.

In such a case business contents insurance would be covered under what is known as a Combined Commercial insurance policy. These polices are available for all business types who do not fit a package policy and require contents insurance.