Steps that you need to take on the way to set-up your consulting business —
Choose your legal structure– It is best to formalize your business structure right from the beginning, both for the legal and the tax considerations.
The basic business entity types —
Sole Proprietorship
General Partnership
Limited Partnership
C Corporation
S Corporation
LLC (limited liability company)
A brief explanation of each business type —
Sole Proprietorship —
Advantages —
For erecting a business operation, a sole proprietorship is an effortless way for it. For a small business owner, sole proprietorship is of very much assistance.
In a sole proprietorship, your business is managed by you, all of the profits are surfaced to you and all the decisions are made by you.
As a sole proprietor, you are less weighed down by the government limits and besides this, you have less to do in terms of reporting and taxes.
Disadvantages —
If your business is charged, you and your personal possessions can be at risk.
In elevating a capital, sole proprietorship may invite intricacy and than you may be required to use your own money or personal loan for running the business.
You might have to do an uphill struggle for getting an employee in view of the fact that sole proprietorships entail no stock shares
General Partnership —
A partnership is an alliance of two or more people giving out their possession and organizing their business. In order to evade a difference with regard to amount of time and energy, each partner use to endow some money in the business which is an innovative idea for creating a legally binding partnership agreement between all of the partners.
Corporation –
A corporation is created by selling shares to its owners. With the purpose of managing the company, these owners than opt for a board of directors.
Advantages –
Since corporation is considered as a separate ‘entity’ in almost all the cases, so it can be sued, taxed and can also go through a contractual agreements as well.
A corporation does not necessarily put up the shutters during the change of an ownership.
Through selling of a stock, Corporations can heave money and it can also take away the cost of benefits for its officers and employees as well.
Disadvantages —
It is an intricate administration.
It requires an enormous amount for a formation.
There is a double taxation for some owners.
For any paid dividends, taxation is done at the corporate level as well at the personal level.
Limited Liability Company (LLC) —
Advantage — Unlike general partnership, owners do not have their personal assets at risk when the LLC is sued.
Disadvantage — There are stringent IRS rules as to when you can be taxed as an LLC and to become an LLC, you need to meet up with those rules in a different states.
Limited Liability Partnership (LLP) —
Advantages —
There is a Limitation on the liability for a partners which is the great plus point in it.
There is a flexibility of capital structure and there is a flexibility in dealing out with the income and expense to the owners too.
Disadvantages —
It can be pricey to produce it.
It can invite more legal issues as some LLP statutes are yet inexperienced in court regarding many matters.
There can be a difference in the requirements from state to state and besides this, Laws are too not as consistent as they are for a corporation.
Prepare your business plan — Like any other business, it is imperative that you organize your own business plan. In the market, there are numerable books and business plan software to assist you in preparing your business plan.
Once the plan is put into implementation, it gives a base for a comparison and for a measure achievements.
It furnishes with the detail monthly projections for the current plan year and gives a yearly synopsis for the next two years.
For executing a business ideas and strategy during the next 2-5 years period, Business Plan function as a guide for a businessman to propose a rational and logical framework.
It provide foundation of co-operation with the representatives of third party financial institutions, such as – creditors, government authorities, bankers and lenders aimed at obtaining loans and capital investment.
Create your home office — If you are starting your business with a pea-nut amount of money, than begin by working from your home. This is utterly important if you are boarded on this business on a part-time basis. If you are looking ahead to get together with the clients on a regular basis in your home office, than better make sure of your neighbors as they can criticize about the big number of a traffic in your area. When you work at home, your home office fetches you with the many advantages. This embraces the chances of subtracting the mortgage interest, utilities, cleaning and the upkeep. You will be also able to make use of your internet connection, dining room table, home computer, telephone and the other facilities which are in a home.
Hence, these are the basic business consulting steps which are needed to be considered.
