When starting a business, it is important to understand that certain aspects can actually determine the relative success or failure. One of these multifaceted aspects would be that of planning. When planning for a particular business establishment, the structural consideration plays a key role. You can view this from any perspective, be it that of investment or legal, but it retains a significant role in shaping your business dynamics. So what are the most common forms of opening a business and what are the advantages/disadvantages associated with each?
- Sole proprietorship/Corporations/Limited Liability Company
In this type of business setup, there is only one single owner of the business and there isn’t any difference between the business venture and the owner. The owner is legally liable for any kind of losses and profits the business venture makes in the future. When it comes to taxation, the owner just has to pay the taxes based on the profits made by the business venture. However, funding the business via capital can be difficult as the owner is entirely responsible for raising capital.
A Corporation is similar to the type of Sole Proprietorship except that the owner is not legally responsible for the losses incurred by the business venture. It is provided with legal status which shuns the owner from being sued for any kind of losses. A limited liability company encompasses the features of a corporation as well as sole proprietorship.
- Partnership
In a partnership, two or more partners come together for setting up a business. The capital required for this purpose is provided by the partners, wherein the initial investment and profit are decided with a pre-startup contractual agreement.
This can be an excellent option for entrepreneurs who do not have adequate capital to start a business on their own. Also, the support of partner in a business cannot be underestimated. However, on the flip side this can be potentially disastrous as the issue of trust is highly significant when it comes to the relationship between the partners.
The type of business structure for a small enterprise plays a key part and is dependent on a variety of factors. Be it the type of investment needed or the kind of tax payment method you are comfortable with, it all depends on the structure you are comfortable with. There isn’t any tailor made fit for a particular business sector or industry. It all functions on the individual needs of the business.
