Business structure, part 2

June 1, 2000
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In part 1, we talked about the basic types of business structures. In part 2, we’ll explore how these structures relate to the survey business. One of your goals should be to play by the rules in whatever type of business structure you choose. Playing by the rules is a very important part of being a success. Just what do I mean by playing by the rules? The business structure you choose will have both advantages and disadvantages; how well you understand your chosen business structure determines the ultimate success of your business.

Sole Proprietorships

To stay a sole proprietorship means to stay small. Most sole proprietorships have 10 employees or less. Many are family-owned and family-run from either a home office or other building on the property. This type of business is well suited to be profitable if the owners understand certain business principles. Sole proprietors need to understand there is no reason to underprice their services just because they have low overhead; they can charge the same fees as any other business providing comparable services. They should charge rates based on the value of the service, not the cost of developing the product. The small size of this company makes it easy to adjust to fluctuations in the economy. The sole proprietorship is a mechanism where owners can leverage low overhead into real profit, if they develop the proper pricing structure.


Bringing one or more partners into a business structure always brings risk. Choosing partners is never easy and most partnerships change over time. Many partnerships develop into corporations while others dissolve with partners going their separate ways. Partnerships are formed to bring different skills into a company. The same differences that bring partners together can, however, result in their failure over time. As owners mature and financial needs change, the reasons partners were attracted to each other disappear. Partnerships can fail when the partners have different views on work ethics and financial management. But the most common failure of a partnership is the lack of financial responsibility of one partner. Most partnerships are set up so either partner can sign checks and spend money; this results in one partner always trying to control the habits of the other.

While a partnership can become a successful business structure for some companies, it is rare that they last. At best, this may be a testing stage before forming a corporation.


To form a corporation means you must take on the responsibility of meeting all government requirements. With stock shares being the method of ownership, it is a simple matter to add or delete partners. In many cases, employees are given stock ownership as a bonus or stock options that may be purchased at a reduced rate from full value.

Many survey company owners will retire in the next 10 years. Now is the time to develop a plan to turn stock ownership over to the next generation of professional surveyors. Many owners wait until they are ready to retire before considering options on how to turn over control of the corporation to new owners. Waiting will result in taking a reduced value for the company. Often the new owners could be employees of the company, with some help on the investment side and training in management skills. If corporation owners are smart, they can home grow the future owners of their companies, eliminating the need for an outside sale.

Selecting Business Partners

Run an independent credit check on all future business partners.
  • Ask other surveyors about the reputation of any future partner.

  • Make inquiries with your state board of registration to make sure your potential partner's license is current and not under suspension.

  • Find out if the person has another business that would prevent him or her from giving full attention to your business venture.

  • Get to know each other on a social basis before a final commitment is made. Play golf, go fishing or attend sporting events together.

  • Meet each other’s families.

  • Ask yourself, "Do we bring different skills to the business that will benefit us both?"

  • Have frank talks about salary, including bonus expectations.

  • Do you agree on expense accounts?

  • Do you agree on the number of employees needed?

  • Do you agree on working hours?

  • Do you agree on the role of family members in the business?

  • Develop a short- and long-term plan for the new company.

Remember, if the person doesn’t share your views on what it takes to have a successful business relationship, then maybe he or she is not the right business partner for you. It is a lot easier to choose not to go into business together than it is to later get out of a business that has gone bad.

I hope these two installments dealing with business structure will help you develop a company in which you can practice your beloved surveying and yet develop the financial rewards you need to provide for family and retirement.

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