Politics and Business
What Structure Of Business Suits You Best?
Setting up a business can be incredibly confusing, especially when it is your first ever enterprise. There are so many questions you need to answer, and those answers will often depend upon you carrying out a decent amount of research. One of the main early things you need to know about is: what kind of structure should you aim to use for your business? There are a few main kinds, and in this article we’ll go through some of the most important ones that you might want to consider for your company. These are all good in their own way.
This is arguably the simplest kind of business there is, and it is therefore one that a lot of people go for. It is also a kind of default, in that if you work for yourself but you have not otherwise set anything up, you are probably legally running a sole proprietorship. This simply means that there is only one individual who owns and runs the whole business. As such, the expenses and income are included on your personal tax return, rather than a standalone one. However, you are personally responsible for your company’s liabilities, which might not be ideal in some circumstances.
Limited Liability Company
Creating an LLC is simple enough, although sometimes you might decide that you need a little assistance to get it right. An LLC has some distinct advantages, however, notably the fact that all earnings are passed through to individuals and therefore kept separate from the business itself. Unlike a sole proprietorship, with an LLC you are not personally liable for the liabilities in the company, which can be very useful indeed. This is altogether quite a safe way to set up a business, and there is a reason it’s such a popular option.
A partnership is when there are a number of people joining forces to set up and manage a business. There can in fact be any number of people up to 20, so it’s great if you have a small group of people who are really keen to work together. All control and management of the business is shared, with income usually being received jointly. There are altogether very few restrictions around setting up a partnership, so it’s something that you might want to consider for that reason alone. On the other hand, partners face joint liability, and there are times when an LLC is preferred.
A company is unique in that it is a separate legal entity from its owners. As you might imagine, this affords the owners some pretty strong legal protections should the company itself be in any financial or legal trouble. A company, as an entity, can incur debt and even be sued. This is arguably the most complex structure, but once in place it can be a powerful force – albeit one subject to a variety of legal obligations that you need to be aware of, if you hope to avoid the wrath of the law.