The Legal Aspects of a Business Plan?

Answer 1

For anyone looking to start a new business, a proper business plan is essential to success. A business plan spells out the fundamental goals for the company and the methods by which they will be achieved. It is the core document that gives founders a road map for the future, something that is vitally important given the inherent riskiness of any business enterprise.

The business plan will be used inside the company in order to provide a blueprint for building the enterprise. A properly written business plan will describe all aspects of the business, including its product line, production costs, advertising and marketing strategies and, perhaps most importantly of all, its legal obligations and risks. This last item will be particularly important for any business that may be subject to significant litigation risks during its existence.

It is during this phase that business owners will need to consider the legal structure of the business, which can have profound implications down the road. Generally speaking, the entrepreneur must decide between a sole proprietorship, a partnership or a corporation. In making this decision, the business owner must balance simplicity, cost and ultimate liability to make a sound legal and business decision.

The business plan will also be used to obtain outside financing from banks, venture capitalists and other financial institutions. Most young businesses do not have much of a track record, which can make it difficult to get loans and lines of credit.

In the absence of such experience, a business plan can give bankers an idea of your financial position and your future prospects. All business plans will include a section describing the market in which a business is entering, the competition the company is likely to face and the amount of market share the business is likely to take.

With these estimates in hand, a business can create projected financial statements that will predict future revenues and profits. These numbers will be used to determine the company's suitability for investment. This will also give the business owner vital information concerning the viability of the company itself.

Although all business plans are ultimately just a best guess by the entrepreneur and subject to revision, it is very important to make the best estimates possible given the information available. Not only will this increase the likelihood of success, it will reduce your possible legal risks in the future. If a business owner were to give banks a knowingly misleading view of a company's financial prospects in order to obtain funding, it could potentially be held liable for fraud.

Any successful business needs to have plan in order to properly execute its strategy while avoiding potential pitfalls along the way. By developing a sound business plan, a company can maximize its potential for success.