Home Business Tips

The Home Business Structure and Entity

Many entrepreneurs and would-be entrepreneurs realize the great income potential from a home business. But, to be truly successful in a particular home business, an entrepreneur must face several decision-making processes that will affect certain aspects of the home business. Two of the most important aspects of the home business are its structure and its entity.

Home Business Structure

The home business structure refers to how an entrepreneur will conduct his income-earning activities. There are two major choices for the entrepreneur:

1. Retailing
   The entrepreneur simply sells certain products and services, via the Internet. For example, an entrepreneur will sell fantasy-inspired designs for t-shirts and mugs.
2. Networking
   The entrepreneur creates an organization or a sales force from which he gets leverage. For example, an entrepreneur will recruit three people who will sell a certain food supplement. In one week, these three recruits (also called down-lines) can sell 12 bottles of the food supplement, a feat that could not be accomplished by one person alone.

Of the two structures, retailing requires less social skills. But networking can bring in a potentially higher income. If an entrepreneur decides to have a networking structure, the best home business tip is to first research and study publications about networking or network marketing. Of course, an entrepreneur may set up a business which can do both retailing and networking.

Home Business Entity

The home business entity refers to the ownership of the home business. It may be sole proprietorship, partnership, or corporation. Each have their own advantages and disadvantages. To help a new entrepreneur (especially one with no commerce background), here are brief descriptions of the various business entities:

• Sole proprietorship – The home business is owned by one person.
  • Advantages:
    • Freedom to make all decisions
    • Simple organization
    • Complete profits
  • Disadvantages:
    • Limited capital
    • Unlimited liability of the owner
• Partnership – The home business is owned by two or more persons who agreed to work together as co-owners and share the profits of the business.
  • Advantages:
    • Combination of talents, skills, and abilities
    • Larger capital when compared to sole proprietorships
    • Easier to organize when compared to corporations
  • Disadvantages:
    • Divided authority
    • Unlimited liability of the partners
• Corporation – The home business is owned by an artificial and intangible entity which is managed by a group of people. These people have stock shares in the corporation.
  • Advantages:
    • Attractive to investors who will provide greater capital
    • Easy to expand and to transfer ownership
    • Limited liability of the stockholders
  • Disadvantages:
    • High maintenance expense

    High tax on the capital stock

Deciding which entity is best can make the entrepreneur smoothly conduct his business. But before making a decision, it will be beneficial to the entrepreneur and his home business to first consult an accountant, or a lawyer, or any reliable and competent business professional.

Small/Home Business Tips 2006-05-03 Home Business Tips