Writing a Business Plan - Corporate Structure

To begin, be absolutely clear that prior to accepting any money from an investor, any investor, you must provide the investor with a (PPM) Private Equity Placement Memorandum and a Subscription Agreement. Assuming that your corporate organization is a limited liability company you will also need to provide them with an LLC Operating Agreement. However, the very first document you need to prepare is the business plan. It is very likely that the information in the business plan will ultimately be incorporated and included in the Private Placement Memorandum. make sure that you don't include anything in the business plan that is inappropriate for inclusion in the Private Equity Placement Memorandum.

Note two separate pieces of information. The first is that the business plan will be the most difficult of the documents that you prepare. However, there are a number of resources that you could avail yourself of which will substantially aid you in the preparation of the plan. The second is really a recommendation. The overall thrust of the plan should discuss how you would use all the money that you raised. This assumes you will be successful in raising the entire amount you are seeking. Within that description you want to establish a minimum raise so that at a certain success point of raising capital you can release the initial capital raised from escrow. An example would be if you were trying to raise $1 million. Your business plan should describe how that million dollars would be utilized; however, rather than wait until the entire 1 million dollars is raised you may also wish to describe how you would begin operation at $100,000. In this manner, once you have raised the $100,000, you can begin accessing and using the money. Keep in mind that it is generally much easier to raise money for an operating company than it is for a startup. So if you can successfully prove your concept on a reduced scale with the hundred thousand dollars it will give you added credibility for the balance of money you're trying to raise.

Structure Corporate Entity

The first decision you want to make when you start the business plan is what the corporate entity is going to be. Will it be a Limited Liability Company (LLC), S Corp., or C Corp. I strongly recommend that you structure an LLC. In all three cases the liability protection is equivalent. The difference is the tax structure. With a C. Corporation, distributions made to the shareholders are paid out after C Corporation pays taxes. Then the dividends to shareholders are again subject to taxes. The earnings and distributions of C Corporation is subject to being taxed twice. With an S Corporation and LLC the earnings and earnings distribution of the company are taxed just once at the shareholder level. So from a tax point of view either entity is equivalent. However a further difference between the two is that S corporation shareholders must be individuals and cannot be corporations or LLC’s while an LLC can have both individual and corporate shareholders. The second primary distinction is that an S Corporation can only have a maximum of 100 shareholders while an LLC has no maximum number of shareholders allowed. So absent a very compelling reason I strongly suggest that you establish an LLC. This is a very important distinction that could hamper your ability to raise capital later. So again, we recommend the LLC for all its advantages.

Filing LLC Documents

In most states you can log on to the state website and fill out the forms and organize your own LLC for fees that are typically around $100. The other two decisions you wish to make is deciding the name of the LLC and its web domain name.

Domain Name

I suggest that you create an short acronym of the company name for the domain name. Once these two decisions have been made you can typically check to see that the names are available through the state website. The website will most likely have a link that will allow you to not only check to see if the name is available but also to put a hold on the name. The domain name you select can be checked at websites such as www.GoDaddy.com. Once you've decided and confirm the domain name is available you should register it in your name for a cost as little as $10. Once you've completed these two tasks, you can proceed in the preparation of the business plan.

Business Plan

Let's discuss generally what should be in the business plan. A well written business plan can easily exceed 25 pages. The best way to start off is to develop an outline of all the major information needed to be included in the plan. Once you have the general outline begin filling in key topics within each general topic. At this point you're trying to get what is in your head onto paper in the general form. Do not be concerned at this stage with actually writing the plan. Though all parts of the business plan are important the first few lines of the first paragraph will generally set the tone for the reader. Remember that a business plan and private placement memorandum are very boring documents so you must draw the reader into the document to encourage them to read the entire document. If they don’t read the entire document they are unlikely to invest in your project.

You need to make sure that there is no statements in your business plan not appropriate for a private placement memorandum.

We strongly suggest you read the available sample business plan in conjunction with the business plan outline. When taken together you will get a much better sense what your plan should look like. The outline and sample business plan is available at

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