When you form a new business, you have a choice of four kinds of legal structures: a sole proprietorship, a partnership, a corporation, or a limited liability company. Each of these has its own distinct legal and tax differences, and you should use these to your personal advantage. Here's an overview of each:

Sole Proprietorship
A sole proprietorship is usually for a small business with few, if any employees. The biggest advantage is that it is easy to form and operate. All profits and losses flow directly to the "proprietor" (owner) and are reported on his or her personal Form 1040. The disadvantage is that the proprietor's assets, everything they own, is not protected from creditors. If the business gets into financial trouble, their house, car, toys and everything they own can be taken to pay the business bills. If the owner dies, the fair market valve will be included in their estate.
Start-up costs and ongoing expenses (tax-preparation) are minimal. If you intend to work only for yourself, with just one or two maybe even part-time employees, consider a sole proprietorship.

Partnership
Partnerships profits also flow directly to the partners/owners personal Form 1040. This means that if you have loses, they are directly deductible (up to the amount you have invested/contributed) to the partnership. (Invest $10,000, lose $12,000 and deduct $10,000 first year and carry-forward the $2,000 loss balance to next year.)
The disadvantage again is no legal protection. Each partner is responsible for all the partnership bills. Be sure to have a "buy/sell" agreement, which is a formal, legal plan to transfer ownership if one partner dies or withdraws from the partnership.

Corporations
C Corporation
This is a separate legal entity that has its own assets (anything it owns) and liabilities (anything it owes). Individuals own stock in the company. It means that it is easy to split up or transfer ownership. If someone dies, the stock goes to their estate. If a stockowner/employee quits, they can either keep or sell their stock. Other individual investors or institutions can buy and sell the corporations' stock.
The primary advantage is that the shareholders have limited liability. If the business fails, goes bankrupt or is sued, the liability stops at the corporate level and the shareholders personal assets are generally not in danger. However, in closely held corporations (2-10 shareholders) the top executives may be held personally responsible for the actions of the corporation and in almost all lending situations, they will also have to personally sign the loan papers.
Double taxation is a disadvantage because the corporation has to pay takes on its profits and then if any of these profits are distributed to the shareholders, they also have to pay personal taxes.

S Corporation
A C corporation with less than 75 shareholders can elect to be classified as a "S" corporation. This allows both the profits and loses to be passed directly to the individual shareholders, in proportion the amount of stock they own, and avoids the double taxation of a C corporation. The S corporation can issue only one class of stock but preserves the limited liability for its shareholders.

Limited Liability Company (LLC)
This newer form of legal structure has two advantages. First, it is taxed like a partnership (all profits/loses flow through to the individuals) and second, it has limited liability similar to a corporation. It also offers flexibility in sharing of profits in that one person may control 25 percent of the LLC but receive 80 percent of the profits. Like a partnership, an LLC expires when an owner dies, so a buy/sell agreement is required.

There are other variations of all the above and it is strongly urged that owners engage legal and or accounting counsel to assist them in the determination of the best form for a particular situation.

Networking, in its simplest form, is meeting other people in a non-sales environment where you have the opportunity to exchange information.

As professionals, people don’t like to do business with people they don’t know. Getting to know each other is the first step in doing business with each other and networking is the first step in getting to know people. The networking objective is to exchange information, make an analysis of the information, and if appropriate, act on it.

Here’s a list on developing effective networking habits:

• Attitude. If your going to network, adopt a "make it happen" attitude. It’s an active, not passive process. You can’t be partially involved, you have to be dedicated to "making it happen."
  
• Objective. The networking objective is to get information. That doesn’t mean building lasting friendships on the first meeting. Introduce yourself, make appropriate conversation, exchange cards, make some mental notes (or write them on the back of their card), move on, and don’t feel bad about it.
  
• Approach. Be friendly, open, and foremost, yourself. Draw out the other party. Glib is okay. In a group of 50, your goal should be to make contact with 15% of the people (8) in an hour’s time. That’s 7-plus minutes each and plenty of time to get acquainted.
  
• Delivery. Be able to state your professional abilities in a quick, succinct manner. You’re attempting to achieve prompt understanding and recognition in the mind of the other party. Don’t tell your life story or go into great detail on your latest deal.
  
• Listen. Networking’s for listening, which means the other party does more talking than you. Concentrate on asking question and making mental notes. This is easier if you’re listening and then you can always follow-up.
  
• Qualify. The information you get determines how soon and for what reason you’ll follow-up. Build your own qualifying categories. Here’s some samples.
  

  A. Definite business lead = fast action follow-up.

  B. Access to business lead = information follow-up

  C. Important individual in their profession = information follow-up

  D. Interesting person = worth knowing in their own right = chatty follow-up

  Create your own categories.

"Strategic" or the word "strategy," is a specific method to reach a goal or meet a need. It's both a science and an art and it involves a plan to reach a goal. Don't get strategies and tactics mixed up. Strategies are for long-term planning where "tactics" are for short-term goals."Alliance" is a formal pact of union in a common cause. It comes about because of an affinity or natural attraction between the parties involved.
So what we could be saying is that a Strategic Alliance is

Usually, a strategic alliance is a relationship between a large and a small company. The large company offers:

• Stability - they have been in business long time, encompass big operations, and support well-heeled overhead
  
• Credibility - they have a "brand name," address big, well targeted markets with large advertising budgets
  
• Mass Production Capability - frequently their production capability is worldwide and they need to keep these plants productive
  
• Established Marketing - Again, worldwide, with large, well-trained sales forces
  
• Established Distribution - with warehouses, delivery/transportation infrastructure in place
  
• Financial Resources - In huge amounts capable of furnishing the small company with multiple rounds of financing
  

The small company offers:

• Innovation - apply the 30% rule -- make your product/service 30% cheaper, faster, or better
  
• Speed - your decision making is with 1-3 people - no committees
  
• Flexibility - to quickly turn attention to problems, challenges, opportunities
  
• Economics - the ability to execute at much lower costs
  

One of the good ways to get you thinking about strategic alliances is a brief discussion on the potential pitfalls in putting together an alliance. Common pitfalls include:

• Trust - This pitfall emphasizes why mutual culture beliefs are so important. Big companies say entrepreneurs are "mavericks" and can't be controlled. Entrepreneurs feel big companies represent politics, that they will steal technology, and take away their company. The psychological commitment, founded on trust, is more important than the written deal.
  
• Order versus Mess - Large companies have a need to control, which creates supposed predictable results. Entrepreneurs use their messy flexibility and unpredictability to create innovations and breakthroughs.
  
• Risk - Large companies try to control risk. Entrepreneurs thrive on risk. It's a different attitude toward failure and another culture conflict to explore.
  
• Time Commitments - Large companies make a clear distinction between work and leisure hours. Entrepreneurs merge their business and personal time. Often, their leisure time involves their business like out-of-town tradeshows or weekend family shopping to do some competitive comparisons.
  
• Employees - Large companies crave large numbers of employees to build power structures. Entrepreneurs run lean employee machines to contain overhead.
  
• Compensation - Large companies pay big salaries. Entrepreneurs share unpredictable cash results and uneven cash flow for high-risk, high-reward equity cash-outs.
  

With all the industry consolidation and continuing downsizing going on in the large corporate environments, there are some subtle considerations for you to note. These fall under entrepreneurial due diligence requirements. Some can be accomplished prior to approaching a prospective alliance partner.

• Clearly identify market or industry area leaders - Maybe your assessment will show that you are better off teaming up with a second or third tier company. One that is more aggressive than the leaders or one pushing growth in your niche.
  
• Examine your potential partner's "partnering" history - Can you identify other companies who have partnered with your target? How about a company which has been acquired? Contact the CEO and ask about their experience with your prospective partner.
  
• Evaluate their corporation business plan - Don't just focus on the division/niche you're involved with. Are there roomers about a possible merger with another large company? How do you think this would effect your alliance? Determine would could or would buy THEM and how that would effect you.
  
• Establish an exit clause -- in the event of an unfavorable takeover/merger. This is a tough legal clause to negotiate. Use your and your attorney's best efforts to work on this one, BUT, don't make it a deal killer.
  
• The 2nd biggest point in establishing an alliance is to attempt to identify and develop a solid relationship with an individual or group on individuals (advocate/s) in the potential partner company. Don't stop there, also build a second-level advocate relationship in case your primary one gets promoted or transferred.
  
• Biggest Consideration - Ensure goals are mutual. This is easy to say but tough to assess.
  

• Product-line synergies - Are there 2nd and 3rd generation possibilities for product development
  
• Value-added sales channels - Who is best equipped to handle service, warranties, distribution
  
• Complementary R and D efforts - again, 2nd and 3rd generation development and cross-industry applications (what other industry areas would buy your products/services)
  
• Corporate culture - that makes the whole greater than the sum of the parts (your R and D expertise with their sales capability)
  
• Cash - in big amounts, always ask for more, pad your line items
  

Remember, seek strategic and operational synergies as well as cash. Money is NOT the key motivator to successful alliances.

You and your management team need to discuss and negotiate the basic deal. Don't bring your attorney along. However, bring your legal counsel into the behind the scenes discussions early on. Keep them posted on your progress so they understand your motivations and get a sense of the cultures involved. They can help you think through and develop some important points from the very start.