Starting a Business

Starting a Business

Business Basics & Types

Write a Business Plan

The first step in making a decision to start a business is writing a business plan. Whether big or small, every business should have a written business plan before moving forward. If you have never written a business plan before, there are resources that can assist you. We recommend the New Jersey Small Business Development Centers, which have offices in every county. To find an office near you, call 800.432.1565 or visit www.njsbdc.com.

What Type of Business Should I Choose?

When organizing your first business, there are different business structures from which you can choose. You should have a good understanding of the pros and cons of each type. It is strongly recommended that if you are unsure of which structure is best for your business, you should seek professional advice from an attorney or accountant.

Sole Proprietorship

  • Advantages
    • Low start-up costs
    • Greatest control by owner
    • Minimum working capital requirements
    • Tax advantage to small owner
    • All profits to owner
  • Disadvantages
    • Unlimited personal liability
    • Lack of continuity
    • More difficult to raise capital

Partnership

  • Advantages
    • Ease of formation
    • Low start-up costs
    • Additional sources of venture capital
    • Broader management
    • Limited outside regulation
  • Disadvantages
    • Unlimited personal liability
    • Lack of continuity
    • Divided authority
    • Difficulty in raising additional capital
    • Hard to find suitable partners

Limited Liability Company

  • Advantages
    • Limited liability
    • Flexible management structure and ownership
    • Continuous existence
    • Legal entity
    • Easier to raise capital
  • Disadvantages
    • More expensive to organize than a proprietorship or partnership
    • More regulations than a proprietorship or partnership

Corporation

  • Advantages 
  • Limited liability
  • Specialized management
  • Ownership is transferable
  • Continuous existence
  • Legal entity
  • Easier to raise capital
  • Unity of action account having centralized authority in board of directors
  • Disadvantages 
    • Closely regulated
    • Lack of continuity
    • Charter restrictions
    • Extensive record-keeping necessary
    • Double taxation, except when organized as an S Corporation
    • Difficult to liquidate investment

For additional information, review the Starting a Business Checklist [pdf 440KB].

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