Limited Partnership

Business partnerships can be either general or limited, and as far as tax codes are concerned, exist as long as profits, losses and costs of a business are shared. While general partnerships are more common, limited partnerships are a popular method of raising capital from passive investors who prefer to not be involved in day-to-day business operations. Limited partnerships (LPs) have two sets of partners, namely one or more general partners who have personal liability and one or more limited partners who are not liable for debts. Business owners who do not want the liability for the debts incurred by the corporation prefer this option. Limited partners usually do not play any role in the day-to-day management of the company.

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Pros of Limited Partnerships:

• Generally, pass-through taxation is applicable to limited partnerships, meaning that the tax burden is passed on to the partners instead of the partnership itself. Thus, profit earnings are passed on to the partners in the form of wages, income, and profit payments and each partner pays tax that is proportionate to his individual share of profits.
• A business can obtain much-needed investment capital by giving more passive investors the option of reducing their risks by becoming limited partners
• Since there is no direct involvement of limited partners in the management of the business, general partners enjoy full autonomy and have the right to make important business decisions.
• In the case of a general partnership, all partners are responsible for the debts and other liabilities. The liability of a limited partner does not exceed his capital investment in the company.  

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What to Consider Before Starting a Business

It can be a very compelling and driving force – you’ve got a great idea, a unique service, a fantastic line of recipes, or a can’t-miss product.  But launching a business is not the next step…it’s the last step on the road to entrepreneurship.  Your time, money, and future are on the line, so take some time to get your ducks in a row and look at the business with a rational eye.

Make a Business Plan

A business depends on a lot more than great products and services to be successful.  Like a newborn child, it has its own life force that comes with certain needs and requirements in order for it to survive and thrive.  Plan out the structure and processes of your business first.  You will need a hierarchy of management, which may be very limited at first.  You will need to keep financial records and file taxes.  You will need to determine if you should form an “S” corporation, a “C” corporation, or a limited liability corporation (LLC), which could make a big difference in your profitability.
Of course you will also need to find a location, design the customer interface (whether it is a store, a website, or a mailing list), price out everything you will need to get set up, and determine the size and scope of your business.  You will need to define your demographic so that you can choose the right location and/or target your marketing properly. You will need to research city codes and know what licenses are required.
Making and serving your gourmet lasagna is a very small part of the whole operation, so before you get too far, make sure you are up for all of the other tasks involved and then get things in order.

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The Basics of Finance and How it Determines Success

Owning a business can be one of the most rewarding and satisfying ways of meeting financial goals and ensuring that a person’s future is secure and fulfilling. Today’s economy yields many opportunities to people with different skills and strengths. One of the most basic aspects of running a business that is often left by the wayside is that of financial management. Usually only an afterthought, it is the financial management of a company that determines success. The perfect product or service doesn’t mean anything if the money generated goes into the business only to be misused or unaccounted for. Spending the money earned wisely and knowing when to save or invest in growth should be of paramount concern for a business.

Everyone is aware of the fact that most businesses fail within their first year of operation. Often a major contributing factor that leads to failure is poor financial management. A review of the financial information for many failed businesses shows that the business would have actually been quite successful if the owners had just made sound financial decisions in all aspects of the business. It is always recommended to employ the help of a professional like a banking institution, financial planner or accountant. However, a business owner should understand, at the very least, the basic principles regardless of whether a professional is hired or not. This protects the business and the business owner from fraudulent activities. Keeping up to date with the finances and being aware of the principles involved will also beneficially affect other aspects of running a business.

 

For smaller businesses it may not be practical to hire a professional for all of the financial work, but there several software programs available that help to educate the owner on basic bookkeeping techniques.

A business owner should be familiar and comfortable with using the following:

• Day to day expense tracking – an owner needs to be able create and analyze reports that give an idea of the health of a business.
• Accounts Receivable and Accounts Payable – An owner needs to be able to tell when payment is expected and prepare for any outgoing expenditures

Of equal importance is the ability to determine the current financial state of a business and whether expansion is possible or even necessary due to competition. Being able to identify future trends that can positively or negatively impact a business will go a long way toward helping a business develop staying power in ever shifting market places.

Regardless of the size of a business, the goals of the business and the owner should be kept firmly in mind. While smaller businesses may not immediately benefit or be able to afford an accountant that is an expense that should be worked into a budget as soon as possible. Accountants and even financial planners are able to keep a business on track. They can help to establish realistic long-term goals to increase the chances of success. With the help of a financial professional, cash flow problems can be spotted and tackled.

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