What does it take to become an entrepreneur and start a business? Is it a question of motivation, business ideas or something you’re just born with?
Individuals who choose to own a business should first learn the entrepreneurship basics in order to fuel their passion, and make their dream become a reality in the form of a business. Educating yourself about becoming an entrepreneur can give you and your business a great advantage in becoming successful.
By developing these basic entrepreneurial skills you will have the knowledge needed to turn a business idea into a business entity.
To help you start developing this understanding, we are putting together a four-part miniseries of blogs covering the entrepreneurship basics that can help you turn your entrepreneurial passions into a business.
Choosing your Business Structure
When starting a business choosing how to properly structure your business to best fit your business’ needs is extremely important. There are four common types of business structures where your business’ liability, taxation, and record keeping could differ. Here’s a quick look at the most common types of business entities and how they are different from one and another.
- Corporation - With a corporation, shareholders invest money or assets for the corporation’s stock. The business then becomes a separate entity from the owners, and they avoid personal liability even when the corporation can be held liable for its actions. One disadvantage is the cost to form this type of entity and to maintain the required bookkeeping.
- S Corporation (Subchapter Corporation) - This popular corporation variation allows shareholders to report business income and losses on their personal tax returns at their individual tax rates.
- Limited Liability Company (LLC) - This type of business entity can vary by state, but they have become popular because it gives owners limited personal liability while allowing them to report business operations on their personal tax returns.
- Partnership - This business entity involves two or more people in agreement to share the profits or losses of the business. Here the profits or losses are passed through the partners to be included on their tax returns. The partners are also personally liable for the financial obligations of the business.
- Sole Proprietorship - This is the most common type of business structure where the owner has complete control. It is simple to form, and the owner is also personally liable for all the businesses financial obligations.
“Selecting the appropriate business and or legal structure for a start-up company is a top priority for entrepreneurs,” said Michael Miller, Dean of the Rasmussen College School of Business. The multiple options available all impact the entrepreneur’s ease or complexity of operations, personal risk position, income and cash flow, and financing differently. Having experienced advisors to guide the entrepreneur through the decision process is paramount, especially related to legal and financial matters.”
Building a business requires lots of planning and consideration prior to getting started. Using resources like SBA.gov or earning an entrepreneurship degree can help teach you more about how to create, manage and grow your business.
Make sure to continue learning about the entrepreneurship basics in order to take the necessary steps toward becoming an entrepreneur and running your own business. Keep an eye out for the next installment of our entrepreneurship basics miniseries about "naming your business" coming soon.