What’s The Best Corporate Structure For Your New Business?
A boring question but a necessary one. Unless your business is all about taking money under the table and evading the tax man, you’ll need to think about corporate structure.
There’s a few ways you can go. Your decision will impact:
- Your relationship with partners (if you have any.)
- Your tax situation.
- Your liability.
Entrepreneurs shouldn’t get too hung up on corporate structure, but it’s important to understand nonetheless. I’d also recommend that you pursue your business ideas while in parallel figuring out what’s the best business structure; don’t sit back and wait while you sort this out. With more experience under your belt, you’ll know which structure works best each time you start a new business.
Entrepreneur.com covers the bulk of what you’ll need to know in Choosing A Business Structure.
Remember: Each country’s laws (and each state/province’s laws as well) will be slightly different. For example in Canada there’s no such thing as a Limited Liability Company (LLC). Make sure you understand any specifics of corporate structures in your location; which may involve a bit more digging around.
Generally speaking though, there are some basics that cross most borders.
The simplest corporate structure (aside from none at all!) is the sole proprietorship. It’s simple because it requires the least amount of setup time and expense (you might not even need a lawyer or accountant!) For those of you starting side businesses, a sole proprietorship is probably the best way to go.
A partnership structure is not dissimilar to a sole proprietorship except of course there’s more than one person involved. Lots of people start businesses with a handshake agreement and go from there. It does work. It’s also risky; most people will advice that you get a partnership agreement in place.
Don’t let corporate structure legalese and details slow you down. But don’t ignore this important step either, or you could find yourself in heaps of hot water with any number of people (clients, partners, governments, etc.)
For more information, check out these articles:
- Choosing The Right Corporate Structure For Your Small Business
- What Types of Organizations Are There?
- Guide to Incorporating Your Business
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What timing you have Ben. I’m going through the process of picking a structure now. Thanks for the links.
Happy to help Robert. I’m trying to proceed through a natural evolution here — being an entrepreneur, idea generation, corporate structure (yada yada), building the biz, success and so forth.
Happy holidays.
Ben, this is such basic advice, but so easily overlooked. This is spoken as one of those who are doing the overlooking. As sole proprietor, the idea of corporate structure has been on my list, but not in the top ten to do’s. Maybe it’s time to re-work the list.
Often the most basic things are overlooked. Particularly with entrepreneurs. We tend to be visionary and “big idea” people … but the little details are important. Especially when it comes to money, liability and other things that can make or break your situation business-wise.