One of the most crucial aspects of starting a business is choosing your formation. There are various tax and legal benefits available, but before you register your business, you would be wise to select the structure that best meets your needs.
Gaining a general understanding of common business structures may help you avoid serious complications in the future. Below are three options:
If you’d like to maintain complete control of your business, a sole proprietorship may meet your needs. Many entrepreneurs find this the simplest and most affordable way to establish a viable proof of concept before investing additional time and money into their business.
Remember that taking this route doesn’t separate you from your business. Your structure will not protect your personal assets from any potential company liability.
Forming a partnership is an option if you’re engaging in a business opportunity with one or more individuals. This type of formation allows you to determine the extent of ownership, decision-making power and legal protection for each of you.
Corporations separate business liability from the owners and shareholders. This is often a good choice for entrepreneurs planning to raise capital funding through the sale of stock options.
You can choose from various types of corporations according to your goals and taxation preferences. You might even decide to combine different structures to meet your needs.
Formation depends on your situation
Among the many complexities of launching a business are the choices you must make – realistically, based on unknown factors such as market saturation, intellectual property rights, and the potential for disputes. However, although you may be able to restructure your organization down the road, it’s good to think as long-term as possible from the start.