Business organization - Training Transcript

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Business Organization

Training Transcript
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(Slide 1)
Welcome
Hello, it’s your presenter, Sirra Ndow here with you again today, Week Three of our free
business training webinar series.

Last week we talked about writing your business plan and what that entails and the week
before that, we explored what it means to own a business, how suited and ready we were to
becoming an entrepreneur, what we envisioned when we think of being our own boss, how to
find out what our options were and how to access and evaluate what would work best for us.

(Slide 2)
Training Overview
Today we will be talking about your business’s organization i.e the legal structure and whether
to start your business alone have a partner or more.

(Slide 3)
Business Organization
Establishing a legal business entity is just as important as acting like a true business owner.
This might mean simply applying for an EIN or TIN (employer identification number or Tax
Identification Number) and a trade name DBA (doing business as) as a sole proprietor or it
might involve setting up a corporation with share holders and stock options. The legal
structure itself is just as important as the actual act of creating a business – not only for legal
reasons, but to help you create a business mindset as well.

The areas we will explore in this section are:

 What is Business Organization?
 Why your choice of organization matters
 Types of Business Structures
 Getting Help & Advice
 What To Do / What Not To Do


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(Slide 4)
What Is Business Organization

Business organization is the legal structure or set up of your business i.e the form of legal
entity you choose to hold your ownership interest in your business.

Legal business organizations/structures evolved in the 20th century from the common law of
England and are applicable today mostly in countries that practice common law

Forms of ownership depend on the country of residence/registration or area of jurisdiction.
While there are similar forms of business entities addressed in common law countries, unique
forms of business entities can also be found in many countries although one is likely to find an
equivalent in another country.

(Slide 5)
Why your choice of organization matters?

One of the things that attract people to owning a small business, especially and online
business is how easy it can be to get started but setting up a real business has some legal
ramifications that really cannot be ignored if you are going into business for yourself.

Your choice of business structure could easily be the most important one in your legal business
decision as it can directly affect your bottom line – your business finances and personal
liabilities.

Real businesses require a legal business structure for a lot of reasons mainly:

 Taxes – income tax, employment/unemployment tax, payroll taxes etc. are just some of
the tax liabilities that may affect your business depending on your legal structure. Taxes
are inevitable and unavoidable and can have serious implications if obligations are not
properly discharged therefore knowing which ones affects you is important.
Understanding the tax ramifications of being in business is critical to your financial
health.


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 Personal Liabilities – your choice of business legal entity will determine how much of
your personal assets are exposed
 Getting Financing for your business – your ability to raise funds for your business also
depends on your legal business structure. For example, as a sole proprietor, your ability
to get funding depends entirely on your individual financial worthiness.
 Paperwork requirements – the type of paperwork your required to file for set up and
taxes is different for each entity with Sole Proprietorship being the simplest and
corporations being one of the most complex
 Set up cost – The cost of registering a business at start up is also different with sole
proprietorship being the least costly in most cases

(Slide 6)
Types of Business Structures

Most commonly used forms of business entities are:

 Sole Proprietorship
 Partnership
 Corporations
 Limited Companies
 Non-Profits

(Slide 7)
Types of Business Structures – Sole Proprietorship

Sole Proprietor - This is where most everyone starts. Operating as a sole proprietor involves
little more than simply stating “I’m in business.” With this structure, you and your business are
one and the same. The owner controls the business, owns all assets and all profits are his/hers
alone, even if there are other employees and managers.

While this is indeed where most online marketers begin, it may not be a good place to stay.
Operating as a sole proprietor offers no protection of your personal assets should you be sued
for an issue related to your business, and it means you are personally responsible for any


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business debt you accumulate. Also, since the business is the same legal entity, it can become
crippled if the owner becomes ill or incapacitated and will cease to exist if the owner dies.
Capital can be difficult to raise when it is time to grow since as well since pretty much all credit
decisions are based on owners individual credit worthiness.

.
(Slide 8)
Types of Business Structures – Partnerships

Partnerships are fairly common in small businesses and are fairly easy to set up. It involves
one or more individuals coming together to own and/operate a business. There are two main
forms of partnerships – general and limited. Limited partners do not get involves in running
the business and have liabilities equal to their investment.

Partnerships provide access to a bigger pool of resources, skills and talent and can have tax
benefits but it also means that general partners can legally act on each other’s behalf including
securing a loan

(Slide 9)
Types of Business Structures – Partnerships

Complementary partnerships – partnering with a competitor, investor colleague with
complementary skills, talent or resources

Strategic alliances – partner with another consultant or client to expand your expertise instead
of turning customers away

Founder – employee – Hire a business or operations manager to handle day to day affairs so
you can focus on strategic growth
Friends as partners – long term friends starting a business together. They know each other
strengths/weaknesses. A problem with the business can cause a rift in the friendship however

Family as partners – husband and wife, Father and Son, Siblings etc can start a business
together. Offers great support but like above, a problem with the business can cause family
problems


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(Slide 10)
Types of Business Structures – Corporations

A corporation or incorporated entity that is a legally separate entity with legal rights and
liabilities. In the eyes of the law a corporate have many of the same rights and responsibilities
as humans do although they are not considered as living entities. They are also completely
distinct from the shareholders that invest in it. A corporation is can operate either for profit or
not-for profits. It can be dissolved by court order or voluntary action on the part of the
shareholders. Corporations do not however die when the shareholders dies.

Starting (and running) a corporation is a bit more complicated and expensive than most of the
other structures, but it does have some additional benefits, like the ability to sell shares in the
company to raise funds and the liability protection. A corporation can also be unlimited. This
type is usually used where limited liability companies option are not allowed or available,
when a secrecy in financial dealings is needed for example.

Most countries have more than one type of corporations - German has the A.G corporation
(public limited corporation) and the GmbH (private limited corporations); Spain had the S.A
(public) and S.L (private); UK has the PLC (public) and LTD (private), USA has the S Corp, C Corp
and most recent B Corp. The B or Benefits Corporations are required by law to create a benefit
for the betterment of society.

(Slide 11)
Types of Business Structures – Limited Companies

Limited Companies (LTD) or Limited Liability Company, or LLC are almost as easy to set up as a
sole proprietorship, but affords a degree of protection for your personal assets, similar to a
corporation but are usually taxed differently. You do, however, have to be careful to clearly
separate your business from your personal finances. Failing to do so can leave your family’s
money vulnerable should your company be sued.


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(Slide 12)
Types of Business Structures – Non-Profits

Non-profits uses revenue left over after operational costs to achieve its objectives. They do
not distribute them as profits or dividends. Non-profits can also be charitable or service
organizations and in many countries, they can apply for tax exemption. Tax exemptions status
is not automatics

(Slide 13)
Getting Help & Advice

Business laws vary from country to country and even state to state, so before deciding which
business structure is right for you, it pays to do some research. Talk to other small business
owners, read through your own country or state’s online documentation as well.
It is almost always advisable to seek professional help.

Accountant – Your accountant can you advice on ownership options, help file taxes, preparing
financial statements, audits, forecasting, profitability etc.

Attorney – Advice on forms of ownership, draw legal agreements, help in negotiations, review
documents, leases, negotiations, specialized legal advice etc.

Payroll Service Providers - Payroll Tax Calculation, Deposit and Filing, Business Tax Protection
& Payment, pension withholdings, health insurance etc

Local Chamber of Commerce, trade o professional association – Give you access to a pool of
experience and expertise in various fields

Outsource – pay another business owner or independent contractor to take care of some of
the nitty-gritty while you focus on building your business


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(Slide 14)

What To Do / What Not To Do

Do Don’t
 take your business structure seriously  partner with someone you don’t trust
 conduct thorough research  neglect your taxes
 Draw legal agreements  mix personal and business assets
 seek professional help  Select a structure you don’t understand
 Outsource so you can focus on growing  treat your business as a hobby

(Slide 15)
This completes our session today. Many thanks to you all for being here. I sincerely hope you
found this session useful enough to join us again next week to talk about registration, licenses,
permits and insurance. Please help us improve this training by giving your feedback on the
survey we will be sending along.

Have a great weekend!


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