Knowing The Right Structure
Venturing into the business world is more than just a great idea. You need to be someone who can endure all the challenges you might face in the process of building your own business. Bravery, willpower and a healthy dose of resilience are example of the qualities that a person starting a business should have. There is a long list of the things that should be put into mind but one of the most important thing is that your method of trading.
You will need to think about a lot of aspects in selecting the right structure for your business. One tiny inappropriate choice can turn things in a messy situation in a short span of time. So, it is without a doubt really important that you take into consideration the positive aspects of functioning as a sole proprietor, an LLC or an LLP or even as a corporation in the end. If you have decided to handle the business all by yourself then you can start as a sole trader.
Being is a sole trader is identified as the easiest way of carrying out business. A sole proprietor must keep financial record and file accounts and spend the profits as much as you want. In case you want to hire another person then you might want to take a look at other legal status for your business.
The second type of business structure is an LLP or generally referred yo as a limited liability partnership. Individuals who use LLP to establish their business are lawyers, accountants and other professionals. In LLP, every associate receives a slice of earnings and has a share in the business. Partners are also covered from responsibility so long as they do not turn into a managing partner.
The one that gets to enjoy lots of flexibility is the LLC or limited liability companies. The company is protected from business debt and other liabilities. An LLC is not a corporation but a type of legal company that offers restricted responsibility to its owners. To know more about what a limited liability company is, you can ask an LLC registered agent to help you.
And obviously, just like almost everything in this world, these different business structures have its own pros and cons. Managing as a sole trader is only suitable if you are operating alone. You can get instant accessibility to any earnings you make. However, you are personally responsible for all the business’ debt.
A limited partnership, despite the fact that it offers a lot of flexibility and is quick to set up, can still make arguments arise. Only a particular person is in charge for the liabilities but one wrong move of one partner is the responsibility of another partner.
A limited liability company does not have the credibility of a larger corporation and there is a lot of task attached to an LLC.
As you can see, each business entity has its own pros and cons so it is better to not decide immediately.