Posts

What type of entity? Sole proprietorship

-
Sole proprietorship is a simple unincorporated business, owned and run by one individual.   There is no distinction between the individual and the business.   For example, a business owner is passionate about clock repair.   He opens a business and calls it Frank’s Clock Repair.   Frank is the only owner; he is pursuing his own passion; he uses his own social security number as the tax ID for the business; he uses his personal bank accounts for operation of the business.   Frank is entitled to all the profits of the business venture, but he is also responsible for all of the business debts, losses, and liabilities.   Advantages of a sole proprietorship:               1.          Easy and cheap             2.          Minimal regulatory obligations             3.          One-level of taxation – the sole proprietor pays taxes             4.          Easy identity   Disadvantages:               1.          Owner liability             2.         
Post a Comment
Read more

Why do I want an entity anyway?

-
                As you start a business, you may wonder why you just cannot do it on your own, under your own name.   Absolutely, you can.   You can be a sole proprietor and even operate under a business name, “doing business as” (“d/b/a”) a clever name.   If you operate as a sole proprietor, however, you and your business have a single identity.   If the business is sued, you are sued.   If the business has liability, you have liability.               The same is true of partnerships.   General partners in a partnership are subject to personal liability if the partnership is sued.               If you form a limited liability company or a corporation to operate your business and hold all of your assets, it has an identity separate and apart from you or its owners, generally.     If it is sued, absent specific circumstances, only the business is sued.   The entity formation affords its owners (you) protection from liability arising from the operation of th
Post a Comment
Read more

Planning the Lifecycle

-
This blog has focused on the break up of small businesses.  If you search "small business breakup" on the Internet, you will find lots of advice on planning and setting up your company so that a path for break up is established.  If you and your partner are on divergent paths, that advice is not helpful.  Not at all. Past posts here have discussed the process of breaking up, including advice on gathering all of the business information, bank accounts, loans, payroll, customer lists, vendor lists, whatever your company may have, before talking with your partner about breaking up the business.  Earlier posts have discussed approaches to discussing the break up.  Even if your formation documents are a mess, you can break up your company without destroying your life. But what comes next?  You may choose to run the business on your own or, if your partner bought you out, you may choose to start a new venture.  If you start a new venture, spending some time thinking about its lifec
Post a Comment
Read more

So, Now You Have to Break the News

-
Image
                The split is imminent.   You know it.   The longer you let it go without discussing it with your partner, the more awkward it feels.   You have to start the conversation.               Many of us were taught to take difficult conversations head on, be clear and concise, stand our ground.   As we grow into our interest based negotiation strategies, however, standing our ground starts to sound counter-productive.               Recently, the Wall Street Journal considered a new spin on difficult conversations. In a June 14, 2020 article, Elizabeth Bernstein reported advice on difficult conversations.   Specifically, Ms. Bernstein interviewed Christopher Voss, a former hostage negotiator for the FBI and CEO and founder of Black Swan Group, a negotiations training company with a novel approach.               Mr. Voss advises you to prepare yourself by resetting to a positive mindset .   Envision the conversation going well.   “Rewire yoursel
Post a Comment
Read more
-
  Imbalance in Division of Labor               Continuing our consideration of whether it’s time to break up, we consider some warning signs of an imminent split, as detailed in Entrepreneur.com’s May 16, 2017 article, authored by John Boitnott.   https://www.entrepreneur.com/article/294280               The article mentions the first sign of an imminent split:   Somebody isn’t carrying their weight.   I would modify that only slightly to say, a perception that somebody isn’t carrying their weight.   So many times, I get into negotiations for a business break up and all of the partners believe each of the other partners is loafing.   Each has an inflated sense of his or her contribution and minimized or was unaware of the other partners’ contributions.               You have probably heard the saying:   Perceptions are reality.   That maxim is surely true in relationships that involve work and money.   Once the perception is lodged in a partner’s mindset,
Post a Comment
Read more
-
  Is it Time to Break up?               Business partnerships start so full of hope.   In the beginning, all participants are optimistic about the good that can come from the combination of talents, resources, and personalities.   Over time, relationships might become conflictual – the very things that drew you to your business partner grates on your nerves on a daily basis.   Is it time to break up the partnership?               When you are evaluating the health of your relationship, it helps to have an objective means of assessment.   One objective measure is the Key Performance Indicator (“KPI”).   You may have heard of KPIs in business school, but they can actually help assess the health of a two-person organization.               KPIs include consideration of these factors:   ·       Desired outcome ·       Purpose for the desired outcome ·       Metrics to measure progress ·       Actions that can influence the outcome ·       Responsibi
Post a Comment
Read more