When a new business is set up, a lot of factors have to be taken care of. Entrepreneur’s mind at this time is surrounded by many questions. One of these is what should be the structure of his business and his stand in the company.
There are various structures of business but each has its own advantages and drawbacks as well. So a careful look at all of these is required for a business to be set up.
Your choice of the legal structure should be considered carefully keeping the tax you can pay and the risks that you can take.
Let us have a look at legal structures and help you find a suitable structure for your business.
- Sole Proprietorship- Now, this attracts a number of young entrepreneurs. Keeping he amount of effort you have solely put into it, you are much attracted to have this.
This one is the simplest to set up but has least protection to the owner. Each type has its own pros and cons, so consider them carefully before reaching to a conclusion.
- Partnership- when two or more people come together as a unit to form a company. It has protection just like that of sole trader ship. Also, it can be simply set up.
There is not much legal protection. Rules now state the stand and say of partners in the firm providing a factor of easy partnership without conflicts.
One important disadvantage is that conflict between partners may turn detrimental to the firm.
- Limited Liability Companies- new edition of business structure. It is a relatively newer approach. It is the perfect combination of partnerships and corporations. It has more weight on the benefits like taxation and ease of management.
- Corporations- it is a separate legal entity that is jointly formed and owned by many investors. Basically, there are two types of corporations – S and C.
It is an important decision to make that what is your business going to look like. If you have decided to have a particular set-up, consider both pros and cons before heading to the conclusion. Company is set up once, and if not set right at roots, it is not going to withstand distress of life.
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