Choosing A Business Structure
Forming a business, whether big or small calls for a lot of input and decision making. The structure is among the things that one needs to look at when starting a business. This is because, it determines, to a large extent, how the enterprise is managed and how much profits would be made. There is no structure that is superior to the other, since they all have their advantages and disadvantages. The weight of the advantages is what wins the day.
There are numerous structures from which one may choose. They include sole proprietorship, partnership, limited liability and a corporation. To simplify the decision making process, there are a number of things that one may want to consider. You may want to look at the liability issues. If the business is the type that engages in risky operations that include handling large amounts of people’s money, a sole proprietorship may not give you much protection if something bad happens. A corporation and a limited liability gives you this protection, as it sets a boundary between your business and personal assets.
You also need to consider the decision making process that will be characteristic of the enterprise. If you are the type of person who wants to make decisions very fast and without consultation, a sole proprietorship is what to go for because, the responsibility will lay squarely on you alone. Decide also if you want to share the powers of running the company. This in itself is an advantage and a disadvantage at the same time.
Take into account the start up costs required. Are you in a position to meet all of them on your own? If you are thinking of a partnership, on what basis will the partners contribute to the start up fees and will the amount be refunded or not? Think also about the forms that need to be signed in all the structures apart from the sole proprietorship. Will they be signed in good faith and will they protect each and every partner accordingly?
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