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Chapter 6: Describe Your Company

A standard business plan needs to lay out the background and history of a company. First review your thinking about your company and its long-term strategy. You should also develop baseline numbers, either start-up costs or past performance, depending on whether you are planning for a start-up or an ongoing company.

You're probably noticing as we proceed through chapters that developing a business plan doesn't really happen in a straight, logical order of steps. It isn't really a sequential process.

Company Summary

As discussed earlier in Fundamentals: Pick Your Plan, the standard business plan outline includes a chapter on your company right after the Executive Summary. I pointed out then that you may not need to include this chapter if you are writing an internal plan. However, any outsiders reading your plan will want to know about your company before they read about products, markets, and the rest of the story.

Start the chapter with a good summary paragraph that you can use as part of a summary memo or a loan application support document. Include the essential details, such as the name of the company, its legal establishment, how long it's been in existence, and what it sells to what markets.

Legal Entity and Ownership

In this paragraph, describe the ownership and legal establishment of the company. This is mainly specifying whether your company is a corporation, partnership, sole proprietorship, or some other kind of legal entity, such as a Limited Liability Corporation. You should also explain who owns the company, and, if there is more than one owner, in what proportion.

If your business is a corporation, specify whether it is a C corporation (the more standard type) or an S corporation (more suitable for small businesses without many different owners). Also, of course, specify whether it is privately owned or publicly traded.

Many smaller businesses, especially service businesses, are sole proprietorships. Some are legal partnerships. The protection of incorporating is important, but sometimes the extra legal costs and hassles of turning in corporate tax forms with double-entry bookkeeping are not worth it. Professional service businesses, such as accounting or legal or consulting firms, may be partnerships, although that mode of establishment is less common these days. If you're in doubt about how to establish a start-up company, consult a business attorney.

 

Copyright © Timothy J. Berry, 2006. All rights reserved.