{"id":14879,"date":"2022-11-29T12:59:18","date_gmt":"2022-11-29T04:59:18","guid":{"rendered":"https:\/\/www.projectpractical.com\/?p=14879"},"modified":"2024-02-26T19:06:34","modified_gmt":"2024-02-26T11:06:34","slug":"how-to-select-the-right-business-structure","status":"publish","type":"post","link":"https:\/\/www.projectpractical.com\/how-to-select-the-right-business-structure\/","title":{"rendered":"How To Select The Right Business Structure"},"content":{"rendered":"\n
Starting a business can be exciting, but also scary and confusing. While you don\u2019t need formal business training or an MBA degree to start and grow a successful business, there are some critical choices you\u2019ll need to make from the beginning, one of which is choosing your business structure.<\/p>\n\n\n\n
Careful consideration of which business structure is right for you during your company formation<\/a> can have several implications on your taxes, business and personal finances protection, and long-term plans. So, how do you choose the right structure for your company<\/a>?<\/p>\n\n\n\n In general, you can choose from several types of business structures. These include:<\/p>\n\n\n\n If you do business activities, but don\u2019t register as any other form of business, you\u2019re automatically considered a sole proprietorship. This is true whether you operate it in your own name or its trade name.<\/p>\n\n\n\n The main advantage of setting up as a sole trader<\/a> is that it\u2019s fairly inexpensive and simple. You don\u2019t need to file paperwork for setting up another entity since you already exist. That said, being a sole trader can have several disadvantages. For one, there\u2019s no legal separation between your personal assets and your business\u2019s assets. Also, most banks are more reluctant to lend money to sole traders, making it difficult to raise money.<\/p>\n\n\n\n Maybe you started your business with a loved one or a friend? In this case, a partnership is a good option for businesses with multiple owners. In general, there are two types of partnerships\u2013limited partnerships and general partnerships. In a limited partnership, only one partner has complete control of operations, while the others contribute to and receive a share of the profits. Meanwhile, a general partnership means that all are equally shared.<\/p>\n\n\n\n A partnership can operate as a sole proprietorship where there\u2019s no legal separation between the owners and the business. However, they can also become limited liability partnerships, depending on the liability structure and funding.<\/p>\n\n\n\n A partnership is easy to form and has better growth potential than sole traders. However, it\u2019s more expensive than a sole proprietorship since you\u2019ll need a lawyer to review the partnership agreement and provide legal advice<\/a> and services.<\/p>\n\n\n\n A more popular choice for owners looking to take their business to the next level, an LLC is very easy to form and has no limits on how many shareholders you can have. This is critical in your plan to pursue investors.<\/p>\n\n\n\n The biggest benefit of LLCs is that they provide business owners the same liability protection as corporations while allowing profits to pass through to the owners as income on personal tax returns. That said, with added protection comes more difficulties in formation.<\/p>\n\n\n\nUnderstand Your Options<\/strong><\/h2>\n\n\n\n
1. <\/strong>Sole Proprietorship<\/strong><\/h2>\n\n\n\n
2. <\/strong>Partnership<\/strong><\/h2>\n\n\n\n
3. <\/strong>Limited Liability Company<\/strong><\/h2>\n\n\n\n
4. <\/strong>Corporation<\/strong><\/h2>\n\n\n