Choose A Business Structure
When it comes to choosing a business structure, it is important to understand the options by choosing the right legal structure even if the business is now starting or growing.
A business structure refers to the organization of a company in relation to the legal status of the organization. Choosing the most appropriate business structure brings about a creation of a legal recognition for your organization.
Sole proprietorship is the simplest form of business structure. Sole proprietorship refers to an individual business owner who operates the establishment on their own. Apart from that, it requires less effort when making reports and the business owner has the power to make all financial decisions in relation to operating the business. One person is responsible for all of the company’s profits and debts. It is easy to set up a sole proprietorship business and also easy to exit. Requires low cost to start depending on the kind of business one has to start.
The second type of business structure is the partnership entity and this type of business structure is ideal for anyone who wants to go into business with a friend, family member, business partner and amongst others. It is therefore owned by two or more people. There are two types which includes a general partnership, where everything is shared equally; and a limited partnership, where only one partner has control of the business’s operation while the other person or people contributes to and receives part of the profits. It is also easy to form, great potential for growth and there is special taxation for the partnership business structure.
Limited liability structure is the third type of business structure. Limited liability structure is a legally registered business structure which is limited by it’s shares. All shareholders in this type of structure are liable for all the liabilities the company incurs. The limited liability structure is, limited to the number of shares an individual contributes to the company. The business name should have the kind of operations the setup engages in. It should end with the description ‘Limited Liability Company’.
Corporation is another type of business structure. Corporation is known to be a separate legal entity that means the company’s body is responsible for its own debts and liabilities. It has the ability to enter into a contract under its own name, borrow money from creditors, sue or be sued, and own assets as well. A corporation can come to an end by liquidation or winding up the company.
Whenever you are choosing the right structure for your business you must first start with analyzing your company’s goals and considering local, state and federal laws. By identifying and defining your goals and objectives, you can pick the legal structure that best fits your company’s culture. As the business grows and expands, you can change your legal structure to meet the business’s needs.
Learn to analyze the goals and aims of the organization which will eventually lead us into choosing a business structure that best suits our business.