How is Your Business Startup Structured? - StartupWizz | StartupWizz

How is Your Business Startup Structured?

Now that you’ve decided that you want to start your own business, and you’ve spent time dreaming up ideas and products, you need to begin thinking about the structure and set up of your business. There are many structures out there that aim to meet the needs of many different kinds of businesses – and their owners. Consider all of the different structures in the business world, and find one that you feel meets your needs.

If you’re going at this alone, and you strive for simplicity in structure, then sole proprietorship is an excellent option for you. Being a sole proprietor allows you a highly hands on approach, allowing you to make any and all of your business ideas a reality. In terms of the financial end of a sole proprietorship, this can be a beneficial structure, as you have the ability to place the expenses accrued from the business on your tax return form, which includes any profits or losses that you have over the course of the fiscal year.

In this setup, you have the ability to factor in your losses so that it will link in to your level of income, which may mean less pay outs for taxes, if you’ve had a rough business year.
Not working alone, but instead with a partner or a small group? Then consider the benefits of forming a partnership. When you’re in this partnership, you don’t have to carry the full weight of the business responsibility, instead taking on the obligations as a group.

If you opt for a “general” partnership, then the other partners have the same level of risk and responsibility. But if you have partners who simply want to act like investors, with no choice over business decisions, then a limited partnership model will work the best. Within a partnership structure, you do not have to pay a tax on the businesses income, but the income of the business funnels down as income to each of the partners. From there, each partner then reports their losses and income on a 1065 form.

A final option that should be considered when determining your business structure is a corporation. You’re going to find that the corporation is something that will cost more and has more expansive inner workings than the other options, but it does remove you from full risk, in a sense, as it acts as an individual being, rather than being directly tied to yourself or partners.

When considering this structure, one of the biggest attracting factors is the protection it offers a business owner from potential liability. It minimizes potential loss of assets, because it doesn’t directly tie your income and assets into those of the corporation. With this structure, you also have the potential to raise money for the company by way of selling stock, which allows you to gain much needed capital in a startup business, so you can continue marketing your product or service. But do keep in mind that it does bear a higher cost and usually requires attorney interaction.


How is Your Business Startup Structured?
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