Steps to Structure your Business
Organization is a mark of being professional. A business, first and foremost, is a professional matter and not a personal affair. To give your business that legitimate and professional appearance, you need to choose and implement a business structure.
The key there is to choose the applicable structure for your business depending on its size and management.
Nothing in this world survives or goes smoothly without first being organized, they say. The same truth also applies to businesses. A Business should have some form of structure from the moment it is conceptualized and throughout the years that it is operating in the market. Structuring a business is actually a very simple process.
The first step to structuring is to pick a structure. This structure is a template from which you will base the organization of your business, from assets ownership to management. There are four types of business structures that you can choose from, and these are:
- Sole proprietorships
In this structure, there is only one owner and manager of the business. It is the simplest to set up and to manage. This is ideal for first-time businessmen and small-time entrepreneurs. - Partnerships
The structure is almost similar to a sole proprietorship business; However, there are more than one owner referred to as partners. - Corporations
Most common format for large businesses and those made up of a large number of investors. Corporations, unlike partnerships and solo businesses, can raise stock for capital from investors and public individuals. Corporations are also considered as separate entities all on their own; the owners are not personally liable for funds beyond the scope of the business. - Limited liability companies
LLC’s are similar to corporations; However, like its name suggests, an LLC, the legal and monetary liabilities that are to be shouldered by the owners and executive staff have a ceiling. It is also far easier to set up than a corporation.
Each structure has its own set of advantages and disadvantages. For example, partnerships and sole proprietorships are not considered public businesses hence they cannot have full claim to their business name as opposed to corporations and LLC’s. However, they require less investment to start and operate as compared to the latter two.
Also, as you could see above, corporations provide liability protection to their owners and executive employees. If legal issues arise, the company indemnifies its employees from being personally liable and would not require them to answer any financial concerns out of their own pockets. The partnership and sole proprietorship structure, however, does not. As an owner of this type of business, any legal setbacks or problems that arise during your operation are considered as personal liabilities. You have to answer for them as owner of the business, and would have to use your personal funds for any possible litigation your business might come to.
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