When starting a new business, there are many different structures to select. They all have both strengths and weaknesses, and none is inherently better or worse.
Nevertheless, this does not mean that the structure you choose does not matter. On the contrary, the business structure you select has an enormous impact on what you can and cannot do when starting up and running your new company. Therefore, it is a choice that deserves careful deliberation.
Entrepreneur describes some specific things you need to consider when choosing a business structure.
1. Flexibility
You first need to determine your personal needs as an owner as well as the unique needs of your business. Then, evaluate the different business structures to determine which provides the flexibility required to meet those needs.
2. Formation and administration costs
Some business structures require significant capital to start up, while others do not. Similarly, the costs of running the entity may be greater with certain structures than others. You will need to evaluate the costs relating to the formation and administration of different business structures to determine which one will fit into your budget.
3. Tax implications
Does the structure you choose tax you as an individual, or do you have to pay both individual and corporate income taxes on the money your business earns? This is something to evaluate in detail. Otherwise, you could have a very unpleasant surprise when your taxes come due.
4. Legal liability
Some business structures offer limited personal liability, meaning that you will not be personally liable for debts relating to your business. However, if you choose a structure without limited liability, your personal assets could be fair game to a creditor.
