SELECTING THE RIGHT FORM OF BUSINESS FOR YOUR BUSINESS

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SELECTING THE RIGHT FORM OF BUSINESS FOR YOUR
BUSINESS

• Bill Thomas Craig Scroggs
• Center for Agribusiness Rural Development
  Economic Development USDA

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Alternate Forms of Business

• Sole Proprietorship
• Partnerships
• General
• Limited
• Corporations
• Chapter S
• Limited Liability Companies
• Cooperatives

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Proprietorship

• Procures all capital
• Personally liable for all claims
• Profits taxed on individual return
• Need business licenses
• Should register trade name

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General Partnership

• Oral or written agreement
• Procures all capital
• Partners liable for all claims
• Profits taxed on individual returns
• Need business licenses
• Should register trade name

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Limited Partnership

• More regulated register with Sec of State
• General Partners share full liability
• Limited Partners have limited liability
• Limited partners no part in running business
• Profits taxed on individual returns

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Corporations

• File papers with Sec of State
• Report annually
• Has limited liability
• Business continues after death of owners
• Pays taxes on profits
• Taxes on dividends paid by shareholders

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S Corporations

• Part corporation, part partnership
• Limited to 35 shareholders
• Does not pay taxes
• One class of stock
• Limit on shareholders
• Limit on type of business

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Limited Liability Company

• Combines benefits of corporations partnerships
• Files Articles of Organization
• Members active managers
• Limited liability of members
• Taxed as either corporation or partnership
• Refile when membership changes

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Cooperative

• Limited to agricultural producers
• Limited liability of members
• Requires extensive record keeping
• Limited tax exempt status
• Patronage based on use

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WHAT IS A COOPERATIVE?

• BUSINESS
• USER-OWNED
• USER-CONTROLLED
• DISTRIBUTES BENEFITS ON THE BASIS OF USE

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Why Start a Co-op

• Improve bargaining power
• Reduce Cost
• Obtain Products or services
• Broaden market opportunities
• Improve quality
• Increase Income

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Steps To Organize

• Exploratory Member Meeting
• Steering Committee Formation
• Member Survey
• Market or Supply and Cost Analysis
• Financial Analysis
• Incorporation
• Legal Papers
• Charter Member Meeting
• Implement the Business Plan

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General Rules for Success

• Use Advisors Committee Effectively
• Keep Members Informed and Involved
• Maintain Proper Board-Manager Relations
• Conduct Businesslike meetings
• Follow Sound Business Practices
• Forage Links with Other Cooperatives

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How are Co-ops Different?

• Service at cost
• Benefits proportional to use
• Limited return on capital
• Democratic control

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Sources of Capital

• Debt borrowed money that must be repaid at
  interest
• Equity money value of a property used in
  business, include a risk factor and ownership
  right to property

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Sources of Loans

• Commercial Banks
• Venture Capital Funds
• Revolving Loan Funds
• Federal Government
• State of Georgia
• Public offering of Securities

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Commercial Banks

• Loan request
• History nature of business
• Management
• General information
• Personal business financial data

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5 Cs of Credit

• Character
• Capacity
• Capital
• Collateral
• Condistions

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Venture Capital

• Limited niche
• High growth business
• Minimum investment of 1 million

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Revolving Funds

• Designed to help local communities
• Used for bricks mortar
• Favorable interest

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Federal Government

• USDA Rural Development
• Small Business Administration
• Direct loans
• Guaranteed loans
• Technical assistance

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State Government

• Dept of Community Affairs
• Community Development Block Grants
• Employment Incentive Program
• Downtown Development
• Appalachian Regional Com Development Funds
• Tax-Exempt Bonds
• And many more
• OneGeorgia Fund

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Georgia Department Of Economic Development

• A global agency and one-stop-shop for accessing
  Georgias assets and finding the right components
  for success.
• Specialists assist in
• Business expansion and relocation
• International trade
• Small business development
• Cutting-edge technological advances
• Entertainment industry
• Travel

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Questions??