Home Business Management
When setting up your home business, you have a few different choices concerning how your management will look and operate. Each form of management has different financial and legal benefits and downfalls, and it is definitely in your best interest to consider them carefully. If you are opening and operating a business on your own, listing your business as a sole proprietorship will give you the satisfaction of complete control, and with it, the risk of unlimited personal liability if things go sour.
A general partnership involves less risk for the individual, because the losses and income are spread among two owners. Arrangements can be made to spread more liability to one partner more than the other, but beyond that, there is generally more money available to a partnership [since two of you are springing with your money], but there is more potential for interpersonal problems and both are affected if one member of the partnership missteps in some way.
A Limited Partnership offers a chance for a few people to invest in the home business without being too deeply affected if the home business fails. The financial strain in a limited partnership falls on the founding members , similar to the general partnership model. Limited partners participate in the business, but they are more passive in their participation. They have little influence in the management decisions of the company, but their finances are used. They are liable, then, for the finances which they invest and basically nothing else.
The sole proprietorship is extremely popular as a home business model, since it is completely under the owner's control. Another advantage of sole proprietorship is that since you and your business are taxed as one entity [your businesses profits/losses are considered your personal profits/losses], you can deduct business losses as your personal loss, and your home business can actually end up giving you a tax break when the time to file taxes rolls around. Consider carefully what your vision for your home business is and how much control you would like over it, and use those considerations to choose which means of management will best serve your budding home business.
Excellence in Business/ Bovee, Thill, Mescon 2007 Pearson Prentice Hall
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