How to select the right business structure of your business

Company is not just a word. It is a great thing for every entrepreneur who start their business in a small level. When you start the business, all choices are taken by yourself only. Among them, one is most important choice, which drives you in a right direction to reach your goal. That is nothing but your choice of business structure of your company. It not only affects your business. It also affects members who depends you and your business. It also reflects your taxes and the amount of liability you pay for it. If you choose right business structure, it will cause nothing to your business. So, make sure and be careful to select your business structure. For your guidance below I mentioned the types of business entities.

Types of business structure

The following three primary factors are important to keep in your mind while you choosing your business structures. These primary factors are liability of your face, taxation which you paid, and record-keeping of your business.

Sole proprietorship:

Sole Proprietorship is owned by only one individual.  If you really want to do your business individually, this will helps to reach your goal without any companion. The person who is the owner of the Sole proprietorship, take the responsibility of both the profit and losses of his entity. No one can interpret with it.  It the most common business structure while comparing to other types. The owners of the Sole proprietorship only have the liability to the financial obligations of the organization. However, it is easy to form the business and managerial control of the business is taken by the owner itself.

Partnership:

It is the advanced form of sole Proprietorship. It carries two or more persons who agree to shares the profits and losses of the company. It will reduce the risk of failure and it the loss should be shared by the partners. So, the burden of the sole proprietorship may be reduced by this kind of business. Each partners of the entity must be sharing the financial obligations of the entire business. If you need a partner in your business, you will definitely go for it. Generally it contains more than one person. The partnership also classified into two types i.e., general partnership and limited partnership. General partnership can provide the all the liabilities of the entity both personally and legally. But limited liability, can maintain the certain liability among the members and owners. But, you have to mention it in your partnership deed itself only.

Corporation:

Corporation is a type of business entity to conduct the business. The corporation is a separate legal entity which is completely differs from the person who found these corporations and also carried about the organization responsibility. Each and every action of these entities is legally notable and taxable and on the other hand it makes the profits also. It main advantage is to avoid the personal loss of the person. Sometimes, here it is possible to make double taxation. Probably, it is one of the disadvantages of Corporation. So, to avoid this, the S-Corporation is formed. It may reduce the taxes like the partnership.

Limited liability Company:

It contains the both the benefits of corporation and partnership and this advantage made this as most popular now a day among the others types. It is hybrid form of the business. The owners of the Limited Liability Company (LLC) can enjoy the benefits of limited taxation and preventing their personal liability also. The profits and losses of the LLC can be equally shared by the owners without any taxation. It provides limited liability to the partners. If any losses occur, it doesn’t affect the personal liability.

Thinks to be kept in mind while selecting the business entity

These are all the basic required criteria to keep in mind while select the business structure. Before selecting the business structure you can completely evaluate the following criteria which make your dreams into real.

Legal liability: Everyone needs the legal liability in business and choose the business entity according to that. The personal liability of the owners does not affect by considering the legal liability. Legal liability is nothing but the both the potential liability and personal liability of the organization.

Tax implications: Everyone wants to reduce the taxation and aims to get minimum taxation in any kind of business entity. As mentioned earlier in Corporation makes double taxation. S corporation gives the solution for this disadvantage. For this thing, can clearly explain the tax implications. According to these tax implications, we clearly analyze the tax benefits of every business structure and choose the appropriate one accordingly;

Cost of formation of the entity: Every entrepreneur needs to minimize the formation cost as well as choose the best business structure according to their need. The tax benefits are not at all connecting with the formation cost. Each and every person must form a company and they pay certain amount for it. But it is fully depends on the company registration consultant only. The Company secretary you choose for register your company is the matter to reduce cost. So, make a clear view about your company secretary before you go for your company registration.

Future needs: If you in a start-up level, you will definitely plan for the future also. Why because, you need to elaborate or simplify your entity into next level according to your growth or loss. So, choose your fundamental registration entity likewise. Definitely, this will affect your business and it will put you in the confusing mode. So plan accordingly, in your first step itself.

Flexibility: Flexibility is very important point while you doing the business. Two persons of different goal and different state cannot make a good partner of the business at all. So, Collective goal of the partners only will need to the success and it will definitely reduce your stress level and make you in a flexible mode. So set your goal to provide the maximum flexibility in ownership to each partners. On the other hand, you have to take care of the unique need of the business as well as the personal need of every partner in the same entity.

For Company Registration in Madurai -> Click here