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forth on whether or not to have a partner, but I decided having two heads was better than
one, and having a partner can make the decision-making process easier at times.
In a sole proprietorship or a partnership, the owners are personally responsible for business
debts. If the assets of the sole proprietorship or partnership cannot satisfy the debt, creditors
can go after each owner's personal bank account, house, etc., to make up the difference. On
the other hand, if a corporation runs out of funds, its owners are usually not liable.
Pick Your Partners Wisely
The decision to go about this on your own can be a difficult one. many businesses are con-
ceived while talking with a friend or family member and therefore discussed by all. We've
all heard stories about a magic idea being drawn up on a cocktail napkin. When the time
comes to actually take the first step to self-employment, the plan may include your original
advisers, the cocktail-napkin witnesses, and you may ask them to join you in the new ven-
ture.
I did this very thing. my cousin was my choice. He had a good business sense about him,
he understood the electronics repair market, and we had an excellent relationship.
We formed our very first company as fifty-fifty owners, and this was a good decision for
us at the time.
We then started a second business together and since have amicably gone our separate
ways, but you need to remember that it might not always end right. Business is a funny
thing, and the cash that belongs to the business is even funnier. Don't ruin family or friendly
relationships over business. It's just not worth it.
The good news is that sole proprietorships and partnerships cost less to establish and they
have minimal formalities. Corporations cost more to set up and run than a sole propriet-
orship or partnership. For example, there are the initial formation fees, filing fees, and an-
nual state fees. Additionally, a corporation can only be created by filing legal documents
with the state and must adhere to formalities. These formalities include holding director
and shareholder meetings, recording corporate minutes, and having the board of directors
approve major business transactions. If these formalities are not maintained, the sharehold-
ers risk losing their personal liability protection. While keeping corporate formalities is not
difficult, it can be time-consuming.
Please note that under certain circumstances, an individual corporate shareholder may be
liable for corporate debts, if, for example, a shareholder personally guarantees a corporate
debt. Also, under certain circumstances, a court may determine that justice requires disreg-
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