How Will You Legally Structure Your Business?

The type of legal formation you select for your business can have a most important influence on the success or failure of your undertaking.

This is because your ability to take decisions speedily, to compete in the market-place and raise extra money if necessary is directly related to the legal structure of that business.

There are fundamentally three legal structures to choose from: sole proprietorship, partnership and corporation or limited company. No one form is better than another per se, because each has its own peculiar advantages and disadvantages. Therefore, what is imperative is to select the legal structure that is best for you.

There are a number of questions that you should ask yourself to help you decide which kind of business to select. What do I already know about this sort of business? In which areas of the business will I need assistance? How much money will I need to get started? Where will I be able to get money from, if I want to expand later? What types of risks will I be exposed to later? How can I limit my liability? What kinds of taxes will I be required to pay?

Sole Proprietorship
More than 75% of all businesses in the United States are sole proprietorships. The fundamental nature of this sort of business is that they are owned by just one person and usually, that person is directly concerned in the day-to-day running of that business. As a sole proprietor, you have complete responsibility for that business and all the profits from that business will be yours as well, as will all the debts and liabilities.

The benefits of a sole proprietorship are that you are the only boss, it is very easy to get started, you keep all the profits, revenue from the business is taxed as your personal income and you can stop whenever you like. The disadvantages are that you take on unlimited liability, your ability to raise investment capital is limited, you have to be able to do everything yourself from book-keeping to advertising, retaining high-quality employees can be difficult and the life of the business is limited to your own life time.

Partnership
A partnership is when two or more people share in the ownership of the business. The partners are accountable for every decision collectively, although decision-making might be divided up unevenly by agreement of all partners equally. All agreements ought to be written down, preferably in the company of a solicitor.

The advantages of a partnership are that you get the benefit of other opinions, it is simple to get started, more investment capital is available, partners pay only personal income tax, high-quality employees can be made partners to encourage them to stay. The disadvantages are that partners have limitless responsibility, profits must be shared,partners, may quarrel and the lifetime of the partnership is limited by death.

Corporation
A corporation differs from the other models of company, because a corporation is though of as a ‘person’ by the law. It has a completely separate life from its owners. As such it can sue and be sued..

The benefits of a corporation are that stockholders have limited liability, corporations can raise the most investment capital, they have an unlimited lifespan, ownership is easily transferable and they make use of experts. The disadvantages are that they are taxed twice, starting up is costly and they are more closely regulated.

About the Author:
Owen Jones writes on many subjects, but is currently involved with researching the best virus protection software. If you have an interest in such software, please go over to our website now at Computer Antivirus Software.

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