Are you planning to get into the field of business and looking for a necessary plan? There are various things to consider before planning a business whether small, mid-sized or large scale industry, such as capital, name of the business, registering your business, a business plan, business marketing and much more. But the very first step is to identify the basic legal structure of your business and to properly register your business name as the financial implications highly depend on the legal structure selected. Identifying the legal entity of your business is one of the necessary steps that you should take to ensure the consistent growth of your business.
The legal structure of your business determines the business entity you are planning to establish that includes sole proprietorship, partnership, S corporation, and limited liability corporation (LLC). So you should choose appropriately the type of business you want to form, as the legal framework can affect your legal liability, tax payments and potential for future investment. There are three basic types of business structures, namely sole proprietorship, Limited Liability Corporation and partnership.
Sole Proprietorship: Sole proprietorship is probably the most common and simplest form of business organization to organize which involves a single individual without corporation who operates the business and owns all the assets. That individual solely represents and owns the company in every respect and has the complete control over the business. One of the disadvantages of setting up a sole proprietorship organization is that the individual is solely responsible for the company’s liabilities and the revenues come under his/her personal income.
Partnership: A partnership generally involves two or more individuals operating and managing the business together. In simple terms, each partner in partnership form, contributes to every aspect of the business that includes property, money, and labor. With shared profits and losses, it gives owners more freedom to operate the business. Partnership comes in two basic forms – General Partnership and Limited Partnership.
Limited Liability Corporation (LLC): Limited Liability Corporation or LLC, is an unincorporated business entity which combines the features of both corporation and partnership organization, providing more flexibility to your business than any other entities. The shareholders of this corporation are called as members and they are not personally liable for the debts of the company.
