Posts Tagged ‘corporation’
Having Business Partners in Your Donut Business
April 1, 2010 | 
Author There are advantages and disadvantages to having business partners in the doughnut business. In this post I will discuss the advantages of having business partners. As you know there are four people involved in our doughnut business and thus far it has not been a problem. The four of us are partners and other ventures, beside the doughnut venture, and we have been successful. I am not saying that we do not disagree on things, actually we disagree on a lot of things, but we end up agreeing to disagree. We are lucky that we all give and just enough and realize the role each one of us plays in the business. Respect is an important part of having a business partner and we all respect each other for what and who we are.
Having a business partner is not always a good idea. You really need to know the person and what they are about. How long have you known your potential business partner? Do they have good credit? Do they have money? What do they bring to the table that you do not have? Can you trust this person? Do they have other interests besides what you are trying to do? All these questions need to be answered before you even consider a person to be your business partner. There are many a horror story of partnerships gone bad. One of my business partners Brothers lost over $100,000 in a motorcycle shop business that did not turn out well, basically went out of business. He mortgaged his home for the money and lost every cent of it. There was no recourse against his business partner because he went bankrupt. It is a sad situation but one that he has recovered from nicely. There is no education like experience, though it can be costly.
So you think you have a potential business partner for your fledgling doughnut business? The question is, do you really need him? What are they bringing to the table that you do not have? Maybe it is money that they have and you do not have. If so, you need to spell out exactly what they want in return. Maybe it would be better if they were a silent investor instead of a partner. I have found a lot of times it works better for both parties if one has money and the other doesn't, that's a person who has the money simply invest the money and gets a set rate of return on their cash. Set up a venture capital deal with someone where they get a guaranteed rate of return. You can afford to pay a higher rate of return, make it attractive to a potential investor, especially considering that you could give up 50% of the business if you became partners. Plus the business partner would have control over your business and you would have less of a say than if they were just a venture capital investor.
Having a business partner can Be a good thing or a can be a living nightmare. Do your research on the person and find out how they will fit in to what you are planning on doing with your donut business. A lot of times not making them a business partner but giving them a guaranteed rate of return on their money Is the best thing to do for both parties.
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Getting Your Donut Business Legal
When starting your doughnut business, it is important that you comply with all state and federal regulations. There are legal issues and every business, and you want to prepare yourself for anything that arises. Anything from employee issues, problems with customers, and organizing with the state and federal governments, can pose a problem if not done correctly. Especially, when you are in the food business you need to be very careful on the laws that you may be breaking. It is a matter of public safety since you are serving food. The good thing is you will only be serving one item in your donut business. We are focusing on the small doughnuts on this blog and not the many variations and flavors of doughnuts that can be found in traditional donut shops.
Before starting any business endeavor you will want to find a competent attorney to help you along the way. Just as you do not want to put trust in any one person, you will not put all your trust in this one attorney. You will need to get a second opinion at times, it is just wise to do so.
The first thing you will need to do is organize your business with your state. Most businesses are better off being organized as either an LLC or Corporation. These structures will put a barrier between your business and your personal affairs. Never take someone's advice, whether they be professional or not, as gospel. Learn each business structure and their benefits, downfalls for each one. Depending on who you talk to, you'll get different answers as to what your business structure should be. Many accountants will tell you that a corporation is better and attorneys will lean toward a limited liability company. Find out which one is best for you and go from there.
The operating agreement for your donut business will outline how you will operate, regulate and rule the business. It is especially important to have your operating agreement if there are more than one person in your company, for example business partners. You do not want any misunderstanding about how your donu business is run. A lot of conflicts can be resolved when you have a carefully crafted operating agreement. There have been many failed businesses that were a good idea but failed because of misunderstandings with the business partners. What if your partner goes bankrupt, dies, or perhaps becomes a compulsive gambler? What will you do and how will your business handle this situation? What happens if he or she just quits? These are all legitimate questions that need to be discussed in the operating agreement. You need to pay a lot of attention to the operating agreement, it can save you a lot of trouble in the future.
Be familiar with any contracts that your company may be involved in. It is worth hiring an attorney to review and make any contracts that are necessary for you to run your business. Do not wait until your company is sued to deal with contracts, learn all about them from the get-go. Contracts can be very technical and when things go awry you can find yourself in serious trouble.
Employment law is one of the big things that gets small businesses in trouble. Employment law can be devastating to your business is not done correctly. Everything from employment taxes, terminations, recruiting and hiring employees can cause a lot of trouble if not done correctly.
This is not meant to scare you from opening your donut business, These are just facts that you need to be aware of before venturing into the world of business. Pay mind to the old cliché, don't quit your day job. Always have a backup plan, perhaps have some money saved before you start out on your own.
