Starting a business requires an entrepreneur to make many critical decisions in a short period of time. They have to choose what types of goods or services their company will provide and how they intend to compete with other businesses. They also need to make decisions about the structure of the company.
There are a variety of business types that people can create. Some people establish basic partnerships or sole proprietorships. Others create corporations or limited liability companies (LLCs). There are benefits and drawbacks to each business type depending on the intentions of the entrepreneur.
What should you consider when deciding how to structure your company?
Funding needs
The way people structure their businesses can have a direct influence on what types of funding they can access. For example, those hoping to take on investors may need to consider embracing more formal business structures, including LLCs and corporations. Those intending to work with one particular person who might invest in the company may need to learn about different types of partnerships. Even the decision to invest personal capital can lead to financial exposure for the entrepreneur, which may require careful consideration for optimal protection.
Long-term intentions
Most people starting businesses have a plan for the company’s long-term development. In many cases, the main goal of the business is to generate income throughout their professional lives. They may then intend to dissolve the business when they retire. Others may want to create a business as a long-term legacy with the intention of their children or grandchildren taking over in the future. Some people even create thriving businesses in the hopes of later selling the company for a profit. Each of these goals can influence the way people structure their companies.
Financial and legal liability
There are also a variety of risks people have to accept when starting a business. If the company fails, their resources or future income might be vulnerable. If employees, clients, or customers sue the business, that could cause legal and financial complications for the entrepreneur as well. The type of business that people establish impacts the degree of legal and financial exposure that the owner has to accept. Sole proprietorships and simple partnerships may leave founding parties more exposed, while more complex business structures help limit personal exposure and financial liability if the business fails or faces litigation.
Engaging a skilled legal team to review all the ways you can structure your company can help to set yourself up for success from the earliest moments of business operations. Call Sjoberg & Tebelius, P.A. to discuss all your business needs. 651-738-3433.