When you form a business, it is important to decide what type of ownership structure will match your vision. Setting up the right business structure will help to ensure smooth operations. The following are some of the most common options.
Do It Yourself
There are many kinds of businesses that are run by one person. A sole proprietorship will likely be less complicated to operate than a business with several owners. You won’t need to divide the profits among other owners, but you will be the only one responsible for liabilities and debts incurred by the business. This type of business does not require formal steps to set up, but be sure to comply with any licensing laws that apply.
Form a Partnership
You might wish to enter into a partnership for a variety of reasons. You may form such a business with just one other person, a few others, or with several other owners. The business itself will be a single business, however. Having partners eases your burden in terms of covering costs and liabilities. On the other hand, you do share the profits with your partners. At the onset, constructing a legal agreement between partners is generally advisable.
Be Part of a Corporation
A corporation differs from a partnership in that it is a legally independent entity. Shareholders own the corporation, but they are not considered liable for debts or actions associated with the corporation. A corporation involves more complex legal and tax requirements than regular partnerships.
Consider Other Options
Two other common business structure options include a Limited Liability Company (LLC) and a Cooperative.
An LLC is easier to form than a corporation, but it still offers the limited liability features that a corporation would. It offers more flexibility than a corporation, much like a partnership business would. Instead of being taxed and regarded as a distinct entity, an LLC passes losses and profits to each of its members.
A cooperative may be an organization or a business, as long as its ownership and operations work to benefit its users. The members of a cooperative retain the profits of the business. Typically, the members of a cooperative will have some voting privilege with regard to some of the decisions made. Members elect a board of directors and officers, who then run the cooperative.
There are many factors to consider when setting up a business. Before you get started, you should decide which type of business structure fits your goals. If you need help financing your business, contact Norus Capital today.