I am an inventor with a great idea that will make home appliances safe. There are other products like this one all of which have inherent dangers unlike mine. My product eliminates all safety issues. This product can be compared to, in a versatility point of view, the ???clicker??? where as its development has spawned numerous new products and the 3-prong plug which has made the use of electrical devices safer to use. The new technology in this invention will jumpstart sales growth as it will undoubtedly make items easier to handle around the house. Future products resulting from this invention will open doors to new investments and opportunities. I have hardly any financial skills and no management skills. I possess little net worth and will be in need of start-up funds. I have no manufacturing knowledge but I am convinced that this product will be a pedestal for a wide range of other products.
Unit 1 Individual Project
I have no doubt that this product will change the lives of many people as the ???clicker??? did for remote controls and the 3-prong plug did for electrical devices; this product will safely meet the common everyday consumer needs unlike other similar products. I??™ll need a trustworthy partner or partners with financial as well as managerial ability. I do not possess a lot of start-up funds nor do I have the ability to supply the manufacturing of this product so the partner or partners should also be a major contributor. Finding contributors should be no hard task because of the widespread applications that this product offers. Future sales will be significant.
Sole proprietorship is easy and simple to start up. It is the least costly to operate and I would only pay tax once on profits (Gallagher, H. 2006) but as I stated earlier, I do not have the required management skills nor the ability to expand as funds are limited.
A partnership, also known as a general partnership, is a good idea to start with because the funds of one or more partners can be utilized to finance the business as it starts. Unless otherwise agreed upon each partner equally manages the business. It??™s easier to borrow money in a partnership and I would be taxed on only the profits I get personally from my share of the business. I would, however, have to deal with the partners??™ opinions and decisions. Like the sole proprietorship though I would be fully liable for all of the businesses debt.
Under the limited partnership one or more of the partners are limited or does not participate in the day-to-day activities or management and therefore has limited liability as well. A limited partner is commonly better known as an investor (Murray, J. 2010).
A limited liability partnership (LLP) is more comparable to a limited liability corporation (LLC) in that all partners share limited liability. Partners in a LLP are also not liable for other partners??™ incompetence or errors unless they themselves had a part in it (Murray, J. 2010).
An s-corporation exists when the partners or members want to be taxed at individual rates but want the liability security of the corporate category. It too is a separate body from its shareholders. Shareholders liabilities are only subject to their investment. This type corporations profits are taxed at the rate of the individuals rather than the corporate tax rate (Murray, J. 2010).
Opening as a corporation could be ideal because of the liability protection as well as the corporations??™ ability to sell more stock to raise capital and be competitive in its search for new talent. The disadvantages include high start up costs, various fees, formalities and the double-taxation where the company is taxed on the profit it makes and the shareholders are taxed when they receive dividends (Advantages and disadvantages of forming a corporation. 1999-2010). A corporation is set up as a separate lawful body from its owners. A board of directors is established to make decisions for the corporation. Shareholders are sheltered from liabilities of the corporation (Murray, J. 2010).
A limited liability corporation (LLC) offers protection much in the same way as a corporation except that you are only taxed once on profits through the shareholders tax returns. The limited liability is just as it states; if the company is sued or becomes monetarily responsible for a debt then the debt belongs to the company and not the investors.
After reviewing the pros and cons about the business types, I have decided to go with the limited partnership with the intention of becoming an LLC. Given my current situation it is better for me to have the financial backing of a partner or partners and to also stay clear of the managerial portion of the business. Because the invention is all of my doing I would require a higher percentage than the other partners but will entertain discussion of compensation for the partner that qualified to take the managerial role. This business will succeed because of the demand that is anticipated as well as the drive and dedication of the partnership that will be formed. You choose your team; therefore you choose your success.
Gallagher, H. (2006). Finding a good fit. BUSINESS How-To, 126-128.
Ebert, R.J., & Griffin, R.W. (2009). Business essentials. (7th ed.). Upper Saddle River: Prentice Hall. Retrieved July 12, 2010 from AIU Online Virtual Campus, BUSN105 Introduction to Business. BUSN105-1003B-162 website.
Advantages and disadvantages of forming a corporation. (1999-2010). Retrieved 23 July 2010 from http://www.allbusiness.com/business-planning/business-structures-corporations/686-1.html
Murray, J. (2010) What are the different types of partnerships Retrieved 24 July 2010, from http://biztaxlaw.about.com/od/startingapartnership/f/typesofpartnshps.htm
Murray, J. (2010) Legal forms of business organization Retrieved 24 July 2010, from http://biztaxlaw.about.com/od/businessorganizationforms/a/legalbizforms.htm
Murray, J. (2010) What is the difference between an s corporation and a corporation Retrieved 24 July 2010, from http://biztaxlaw.about.com/od/businessorganizationforms/f/scorpvsccorp.htm