You have the perfect business idea and identified your potential market. The only thing left is choosing the legal structure of your business entity. Should you register a limited company, partner with a friend or become a sole proprietor?
It is a decision that can have far-reaching consequences on your newly found venture and possibly determine its success or failure. Here is what you need to know.
It all depends on your objectives and the prevailing circumstances
Contrary to popular belief, there is no ideal business structure. For instance, a limited company may have some advantages over a sole proprietorship, but only in some areas. It is never a one-shoe-fits-all situation when choosing the legal structure of your business.
Some of the factors to have at the top of your mind include the following:
- The ease of setup: Some business entities involve a lot of bureaucracies and legal processes that can be costly and time-consuming.
- Personal liability and risks: Do you want to be personally liable for your business debts?
- Scalability of the business: You may need to secure funding or attract investors upon expansion, and your business structure matters in such instances.
- Tax implications: Different entities have varying taxation rules, and you need to understand the tax environment your business will operate.
These are some of the factors that should inform your business structure. Remember, you can always change the legal structure to adapt to changing times.
Get the necessary help
Starting a new business venture can be unnerving but exciting at the same time. Therefore, it helps to have the proper guidance when making such crucial decisions. Understand how everything works, from a legal and financial perspective, before making the all-important call.