Before opening your own business, there are some things
that you should pay attention to with different options available to you. Your
business entity can be the most valuable aspect of your team. It’s necessary to
wisely choose the entity that's best for your business, make changes when
necessary, and take advantage of the benefits of your business construction.
When deciding on a structure for your business, choose the one that best suits
your budget and business needs, always remember that there are advantages and
disadvantages for each structure. One of the key decisions you’ll make when
starting a business is its starting step. Your choice of structure will be
dependent on the mass and category of your business, your personal
circumstances, and how much you plan to grow the business. In this article, we
will discuss some business structures.1. Sole Proprietorship.
If
you are just getting started sole proprietorship is great for you. Once you
start exposing yourself to liability and your sales start increasing you will
think that it's time to upgrade to a new entity. A sole proprietorship can be
explained as a less complicated form of doing business. You just need to do
just start selling your product. No Tax ID number is required. No doing
business as registration is required, although one is recommended for marketing
purposes. No business bank account is required. No extra tax return is
required.
2. Partnership.
A
partnership is a form of business where two or more people share ownership of
the business that you wanna start, as well as the responsibility for managing
the company and the income or losses the business makes, each partner would be
personally liable for all debts and obligations incurred. All partners will
focus on active operations within the company. Partnerships can be profitable
if both parties are loyal to each other. If your partner claims that he is
working hard and you are not, look for a new one and get over yourself. No one
gonna help you in this regard.
3. Trust.
Trust
can be described as a system where a
trustee carries out the business on behalf of the beneficiaries. You cannot
consider trust as a separate legal entity. Both an individual and a company can
become a trustee. The trustee is legally liable for the debts of the trust and
may use its assets to fulfill those debts. Strong
relationships are based on trust. Organizations can build a culture of trust by
cultivating honesty and loyalty in workers’ interactions.
4. Corporation.
A
corporation is known as a legitimate entity that is separate and specific from
its owners. Corporations have many benefits such as enjoying the rights and
responsibilities that an individual maintains. A firm managed within the legal
requirements to be recognized as having a legal existence, as an entity
separate and distinct from its current owners. A corporation can consist of a
single shareholder or several. In the case of publicly traded corporations,
there are often thousands of shareholders or maybe more. When you reached the
goal that you were trying to achieve according to your expectations,
Corporation's legal life can be terminated using a process called liquidation
or winding up. You can go solo if you think you have that much potential.
5. Nonprofit Corporation.
Nonprofit
corporations are specialized to do charity, education, religious, literary, or
scientific lines of work. Because their work benefits the public tremendously,
nonprofits can receive tax-exempt status, which means that they don't have to
pay state or federal taxes income taxes on any profits it makes. The biggest
plus point of selecting this form of legal entity is that it is exempt from
paying federal and state taxes on any income earned by corporations, unlike
for-profit corporations. Nonprofit corporations tend to follow organizational
rules very similar to regular C corp. They also need to follow special and
strict rules about what they do with any profits they earn. For example, they
can't distribute profits to members, political campaigns, or social public
events.
6. Limited Liability Company.
A
limited liability company is known as a corporate structure where the members
of the company cannot be held personally responsible for the company's profit
or loss. Although LLCs have some handsome features, they also have a number of
disadvantages, especially in relation to the structure of a corporation. The
main reason for selecting an LLC as an ownership structure is to limit the
principals' personal liability. An LLC is often thought of as a mixture of a
partnership, which is a simple business formation of two or more owners under
an agreement or paperwork, and a corporation that is afforded certain liability
protections.
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