Business Law-Organizing A Business
Business Law-Organizing A Business
There are many things that go into the process of organizing a business. Before you can receive a loan from the bank, you must have a plan to that describes the key elements that go into your business to show the bank. There should be several sections that describe the basis of your business. Each section should have a heading, and under the heading should be an explanation of what your plan is for that topic.
The first section of the business plan should be titled “Description of Business”. Under section one, there should be a detailed summary of what the business is doing to be all about. Section one should explain to the bank:
1. The Business Form – Proprietorship, partnership or corporation.
2. The Business Type – Merchandizing, manufacturing or service.
4. If it is an independent business, an expansion or a franchise.
6. Where the business will be located
For example, if one were to start a car wash business with their friend, then their business description would include that the business would be owned by a partnership and that it would be independently owned. The business type of the car wash would be service, and the service that they would be providing is a place for people to wash their cars. The car wash could be open twenty-four hours a day and seven days a week. They would need the car wash to be located on an open parking lot that it visible to people who pass by. Customers should have good accessibility to the car wash and there should be adequate lighting for night.
If the example business is a car wash that is owned by a partnership, the second section should be titled “Legalities”. This section should concentrate on the components of being in a partnership and what the buy-sell agreement is between the partners. A partnership is a business with more than one owner that has not filed papers to become a corporation. Both partners take part in managing the business. Being in a partnership is the least expensive business structure to maintain. Both partners are personally liable for any business debts. This means that if the business is not able to pay off a supplier of their products, then the creditor can legally go after the house, car or any other possessions of the partners. The creditor can also sue for the full payment of the business debt. There are also partnership taxes to pay. The partnership itself doesn’t pay income taxes. When each partner receives a share of the income, they report it on their own individual tax form. A disadvantage of being in a partnership is that sometimes one partner may want to leave the business. To prevent the business from ending when the partnership does, partners should create a “buy-sell agreement” before they open up a business. A buy-sell agreement is when partners come up with a plan for what should happen to the business incase one partner decides to leave the partnership. Having a buy-sell agreement in a partnership would allow the business to continue after one partner has left it. Because of things like personal liability and the possibility of a partner leaving the partnership, it is very important that you are able to trust the people or person that you are starting the business.
The third section of the business plan should be labeled “Licenses and Permits”. Under this heading, the partners would explain the types of licenses and/or permits that they need to obtain in order to build and operate the car wash. Before one can start a business, they must have the correct licenses and permits. There are also many laws that they would have to follow. It is important to know which legal steps to take when opening a business. It would be wise to work with an attorney and go through the legal details of the business’ establishment. The licenses and permits that the partners would need to obtain depends on where the business is going to be located and what kind of business it is going to be. For example, if they want to open a car wash, they would have to apply for a local license. There are also certain laws that they would have to follow when deciding on the location of the car wash. It is illegal to just open up a business wherever you want. There are zoning laws that allow only a certain number of kinds of business’s to occupy a certain area like a city or county. For example, one zoning law might state that there is only allowed to be four car washes in a certain city. So if there are already four in that city, then they can not open up a car wash in that city.