Factors To Consider In Setting Up A Business Essay

Factors To Consider In Setting Up A Business - Essay Example In addition, Lawrence (2013) a lawyer from a foundation that gives legal advice, suggested that when one is considering a structure for his business, promoter should consider who will own the business and what the activities will be. His choice of business structure will also depend on the type of business proposed, financial needs, and number of owners. In a separate standpoint, MacFarland, (1974, pp 60-61) said businesses are always profit seeking ventures, and as such considerations should also be given to customers perceptions. He said that a lot of businesses fail because of lack of capital, business knowledge, and inefficiency in management. Above views have been supported in the work of Dorman (2011). However, she adds business planning as an important element in business decisions. A business plan is more of a statement of goals and action plan needed to achieve them. Other organizations stated economic factors as underlying principle for choices. The Forestry Dept of FAO (20 05) cited that external, internal and individual factors determine the structure of an organization. External factors are concerns in the environment which are not under the control of owners. These are economic, socio-economic and administrative factors that could affect structure. Internal factors are purpose and organizational instruments while individual choices refer to costs and benefits. Options people have when making decisions to organize Answers to above factors will solidify the type of business structure to be organized on whether it will be a sole proprietorship, general partnership, limited liability company, or a corporation since every structure has advantages and disadvantages. When one chooses an option he thinks is needed for the business, proponent should prepare himself of potential risks and liabilities, the investment needs, costs of maintaining the business structure and framework of income tax. Evaluating these decisions when a new business is starting up Be fore anything else, the proponent must have a personal assessment of his strength and weaknesses and must have a definite goal to success. Stephenson, (n.d.) of the Entrepreneur Magazine, stated that for someone to succeed in business, he must enjoy what he is doing because his satisfaction will be manifested in the success of the business. The owner must take the business seriously and must also believe in the products or services he is selling. The owner must be able to make plans, direct, and above all manage his money wisely. When the proponent is starting with a little budget, the decision to start with sole proprietorship or a general partnership seem logical because he will find it easy to set up, since it only needs one person to organize. He does not need to report to anybody as he is the boss. Sole proprietorship is simplified as it is not required to fill up many government documentations, follow specific rule, aside from having lower taxes. Mconnon (n.d.) said many small businesses started this way then later on changed structure of ownership as it grows. However, sole proprietorship is not free from headaches, as succession is not clear; there is a risk of losing business in case of death and total disability. Sole proprietorship finds it difficult to attract investors, thus it has limited financial resources. Owner has total personal liability on its debts and obligations; while profits are taxed as personal income. General partnership In order to augment owners’ capital, he/she may invite a partner into the business. This way, a general partnership is formed wherein both agree to share in capital and management of business. In general partnersh