Ask any designer and they will tell you that great designs are the heart of their business. Successfully creating and selling a product requires a brand to have a unique vision, creative direction and inventive ideas.
However, I think that most designers would also agree that if designs are the heart of their company, a well-constructed business structure is its head. When brands first launch their lines, it is crucial that their designs be complemented by a comprehensive understanding of the legal and professional obligations associated with creating a company.
Therefore, before you begin selling your wares, it is important that you have accomplished these 2 important things first: written a good business plan and determined the structure of your company.
The first step you should take towards establishing your company is coming up with a business plan. A well-written business plan plays many important roles for both up-and-coming and well-established businesses. Not only is it crucial for securing the funding of investors, it also acts as a guiding document for your company.
Ideally, your business plan should include information about all of the following: your company, competition, financials and marketing.
Company: Your business plan should provide an overview of what your goods or services your company plans to offer. Detail your goals and future objectives, and the direction you would like the company to take. You should also include information about who makes up your team and advisors (if applicable).
Competition: The competition section of your business plan should analyze trends within the industry you are looking to enter. In addition to an analysis of your competition, don’t forget to include how your company will be different
Financials: How much capital did it take to start up your business? How will you turn a profit? How much outside funding do you foresee it taking to make your business thrive? This should all be included in a survey of your financials.
Marketing: This section should include which marketing tactics you plan to use in order to promote your business. Include any information about your social media strategy, your plans to attend festivals or trade shows, planned promotions–anything you have devised to reach your target consumers.
After coming up with your business plan, the next step is to determine the structure of your company.
The business model you choose for your company very much depends on the needs of your individual business. There are numerous structures to choose from, each with their own distinct advantages. Described below are a few common business structures, as well as their tax and legal implications. Read through them to get a better idea of which model might be suitable for your company.
Sole Proprietorship: A sole proprietorship is a company owned by an individual. This business model provides great autonomy for the owner, as she or he is in charge of all operations. However, since all responsibility rests on the owner, so does all liability for all of the business’s financial issues.
Partnership: In a partnership arrangement, the business is owned by two or more people. Two common types of partnerships include general when all liability is shared equally and limited when one or more partners has limited liability while the other has full liability. When entering into a partnership, it is critical that each partner’s role be clearly defined.
Limited Liability Corporation (LLC): An LLC is a flexible business structure that combines the limited liability of a corporation with the daily operations of a partnership. In an LLC, owners’ personal finances are separated from those of their company, greatly limiting their personal responsibility for thing such as company debts. Additionally, an LLC is not taxed as a separate entity; the only taxes members of an LLC pay are based on their earnings.
C Corporation: A C Corporation is a business owned by shareholders. It is technically an independent legal entity, a fact that protects shareholders from legal and financial liability.
S Corporation: Similar to a C Corporation, an S Corporation is a business owned by shareholders. However, the number of shareholders is limited to a maximum of 100. A major benefit of S Corporations is that these business structures avoid federal and state corporate income tax. Shareholders are instead taxed on the dividends that they receive from the company.