Steps to become a Business Consultant
There are a number of steps that you will need to take if you are beginning the set up of your consultancy business.
1) Legal Structure – You will need to choose a legal structure and formalise your business from the start for both tax and legal issues.
The basic business entities are:
- Sole Proprietorship
- General Partnership
- Limited Partnership
- C Corporation
- S Corporation
- Limited Liability Company (LLC)
Basic explanation of the business types:
Sole Proprietorship
Advantages
a) This business type is an effortless way to begin a business operation.
b) The business is managed by you, all profits come through you and all decisions are made by you.
c) Government limits will be less and not much work is required for taxes and reporting.
Disadvantages
a) You and your personal effects are at risk if your business is charged.
b) To generate capital may be more intricate and possible that you will need to have a personal loan or use your own money to run the business.
c) Sole proprietorships do not have stock shares so the employment of staff may be a little more difficult.
General Partnership
This business type is the coalition between two or more people offering their personal effects and organising the business. Each person endows some money into the business which also created a legally binding contract between all partners.
Corporation
This type of business is created with the selling of shares to the owners. A board of directors are appointed for the managing of the company.
Advantages
a) A corporation is seen as a separate entity and in almost all cases it is the corporation that is sued, taxed and also go through contractual agreements.
b) During a change of ownership this type of company is more open and does not stop functioning due to the change.
c) Corporations can put money into the business, reducing the cost of benefits to its employees through the selling of stock.
Disadvantages
a) The administration is intricate.
b) A large amount of formation is required.
c) Some owners face double taxation.
d) Taxation is done at a personal level as well as at a corporate level.
Limited Liability Company (LLC)
Advantage
a) Owners do not have personal assets at risk if the LLC is sued.
Disadvantage
a) You need to meet the stringent rules on becoming an LLC as well as when you can taxed.
Limited Liability Partnership (LLP)
Advantages
a) A partner’s liability is limited.
b) The capital structure has flexibility as do the dealings of income and expenses.
Disadvantages
a) The business can be costly to produce
b) There may be additional legal issues due to the inexperience of LLP statutes in court.
c) Laws are not as consistent as they are for corporations.
2) Business Plan – You will need to arrange your business plan as you would in any business. There are numerous types of software and books available on the market to assist you in creating your business plan.
a) Once the plan has been implemented there is a base for achievements to be measured against as well as being the base for comparison.
b) Monthly projections are detailed and the current plan for the next year is there for you to see and well as the synopsis for the next couple of years.
c) A business plan gives a guide for the proposal of rational and logical frameworks.
d) Provides a foundation for co-operation with third parties such as bankers, creditors, lenders and government authorities for capital investment and obtaining loans.
3) Home Office – If you are starting your business venture on little money then creating a workable office space in your home is a necessity. Not only will you have the many benefits that come with the comfort of working in your own home you will have the added benefit of not having to pay for office space rental and other facilities that your home probably already has.