Prepare a business can be very confusing, particularly when this is your first employer. There are so many questions that you need answered, and those answers often rely on you doing proper research. One of the main first things you need to know is: what sort of structure should you use for your business? There are several main types, and in this article we’ll cover some of the most significant that you may want to consider for your company. These are all good in their own way.
Sole Proprietorship
It’s arguably the simplest type of business out there, and since of that many people are attempting to find it. It’s also kind of a default, if you are self-employed but you have not set up anything, you are most likely legally exercising a sole proprietorship. This means that there’s only one individual who owns and operates the whole business. This way, expenses and income are included on your personal tax return, not a standalone one. However, you are personally responsible for your company’s obligations, which may not be ideal under certain circumstances.
Limited liability company
Creating LLCs It’s pretty easy, although sometimes you might decide you need a little help getting it right. However, LLCs have several distinct advantages, most notably the undeniable fact that all income is passed on to individuals and is therefore segregated from the business itself. Unlike a sole proprietorship, with an LLC you aren’t personally responsible for your obligations to the company, which can be very useful certainly. It’s a fairly safe way to set up a business, and there is a reason why it is such a popular choice.
Partnership
A partnership is when a number of individuals come together to set up and manage a business. The number of individuals can be up to 20 people, so it is great if you have a small group of individuals who actually want to work together. All control and management of the business is shared, with revenues normally shared. There are very few boundaries to building a partnership, so it is something you might want to consider for that reason alone. On the other hand, partners face shared responsibilities, and there are times when an LLC is preferred.
Company
The company is unique because a separate legal entity from the owner. As you might imagine, this gives the owner some pretty strong legal protections should the company itself ever get into financial or legal trouble. A company, as an entity, can be in debt and even sued. It’s arguably a most complex structure, but once in place it can be a strong force – even though it is subject to numerous legal obligations that you need to bear in mind of, if you hope to avoid the wrath of the law.
