Legal Structure of a Business
All businesses should have a legal structure and the owner must decide prior to licensing applications. You can consult with the revenue and customs to establish proper footing in your chosen industry.
You must pick a structure that is suitable to the business that you’re starting because this can affect many things.
For sure, the business structure can affect the taxes that you pay, your accounting works, financial liabilities, management decisions, and the various ways of raising money. There are several structures that you can choose from like self employment, sole trader, partnership, LLP (limited liability partnership), LLC (limited liability companies), franchises, and social enterprises.
These business structures have advantages as well as disadvantages that you need to consider before making the decision. You will need to conduct an in-depth research to find the ideal one. The self employed is the one who is involved in providing services to customers. It can be accounting services, consulting, etc. When you’re involved in trading and you’re a sole owner, you are already involved in a sole proprietorship. This can be a great option for those who want to fully control the business. However, there is one disadvantage – all liabilities will be shouldered by the owner and at times, it can consume your personal assets.
Partnership consists of two or more partners that agree to contribute capital or skills and share the profits or losses. Like the sole trader, the potential liabilities will be shouldered by the partners. If you want, you can opt for the LLP wherein the liabilities are limited. Your personal assets and properties will be protected. The corporation is different and this will require incorporation. This option can have advantages but it can be expensive to organize. You can choose the S, C, or the LLC.
There are hybrid structures these days like the franchises. Still, the true owner is the corporation but the franchisee owns the business and pays for the royalties and monthly franchising fees. Make sure that you pick the right business structure in order to get higher profits. Running a legit business is always a good option to avoid legal issues.
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