How To Choose Business Structure

Now the kind of structure you choose for your business is the most important choice that one has to make when starting a new business. It is also important to know the tax structure that you will have to follow. The kind of structure that you select will determine the amount of tax that you will have to pay. The paperwork will also vary on the choice that you make. So you see that you have to choose the right business in a very smart way. You have to select the structure that will suit the need of your company.Follow the tips in the article to understand how you can choose business structure without facing any problems what so ever

Some of the following structures can be listed as follows.

A Sole Proprietorship

This is one of the non complicated structures that only involve one individual who owns the business and is responsible for all its operations. For individuals who like handling business by themselves this is the best structure. You do not have to go through a whole bunch of formal actions to initiate a sole proprietorship.

 The Advantages associated with of Proprietorship

This business is very easy and non expensive to put together. The cost is very negligible and you just have to pay some limited amount of money to acquire the license and permits.

Total control is something that you  can enjoy  through this  business structure as you will be the only owner of the business. You  have the liberty to call  all the shots when it comes to taking  business decision.

Easy to pay taxes: The tax structure for this business is very easy to follow as there is no legal difference between your company and  you. This structure has very low taxes compared to the other business structures.

The Disadvantages associated with Sole Proprietorship

Unlimited liability- since you are the same as your business you will be liable for all the debts of your business. So you have to consider this factor before you choose business structure.

The capital to raise for this business can be very hard to raise as the various banks are hesitant to give loans to this kind of business as they fear that the business may go into debt and thus the money will not be recovered.

Partnership type of business structure

In this type of business there two or more people involved in the activities  on a daily basis. They also share the losses, gains, management decision and ownership.

The different kinds of Partnerships

General partnerships – In this type of  business structure  the  management duties, liability and profits are equally divided between the partners. If the partners do not share equal percentage of shares then it has to be mentioned in the deed of partnership.

Limited Partnerships – This business structure  is  a lot more complicated than the other kinds of partnerships that are available. The liability associated with this are very limited and inputs are very limited too.

are more complex than general partnership, which allows partners to have limited liability as well as limited input. These limits will depend upon each partner’s investment percentage.

A joint venture – This is usually done for a certain period of time or may be for one single assignment. Here the partners are general partners and have equal right over the business.

 A Corporation structure of business

The advantages of a corporation

When selecting a business structure you should try to go for a corporation  as this has a plethora of advantages. In this type of business the  personal assets  of the business are well protected from the actions and debts of the corporation. The income tax returns of the corporations are very different from that of the owners. The owners will only have to pay taxes related to the corporate profits .

The disadvantages of a corporation

A corporation is a separate entity that is owned by all the stakeholders. However the identity of the business and so the business has to follow a lot of tax requirements and regulations.

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