Being an entrepreneur is pretty hard and requires strong determination, confidence, and the will to learn. But, it’s also much more rewarding as compared to working for someone. Depending on the structure of your business, you either have full control of it or share it with your partner or other shareholders.
First, let’s learn what business structures exist, why they are different, and which one you should choose for your company. Because without establishing a form of entrepreneurship, you won’t be able to legally operate it.
1. Choose a business structure
A business structure, also called legal structure, is basically a type of the company. It determines the number of owners (shareholders), their rights and abilities, and taxes (both your personal and the company’s). Here are the 5 main types, with only the most basic explanation on their differences:
- Sole Proprietorship - if you plan on owning and operating a business alone, a sole proprietorship may seem an obvious choice. As you could probably guess, the number of owners is limited to one, and both the income and expenses are included in your personal tax return.
- Partnership - partnerships allow a few persons to own and operate a company. There are two types of partnerships: general and limited ones.
- Limited partnership - only one partner has unlimited operational abilities. Other partners have limited control over the company.
- Limited Liability Partnership (LLP) - every owner (partner) of the company has limited liability. Each one of them is protected from being held responsible for the actions of others.
- Corporation - it’s a much more complex form of company, with the main difference lying in separating a company as a legal entity from its owners. Therefore, administrative operating and taxing are different, too. However, this also is a huge benefit, as in any legal processes only the company will be involved, separated from your personal assets.
- S Corporation - basically, it’s a perfect choice for small businesses. It has some advantages in the tax field as compared to the usual corporation (also called C-corp). Also, it has the same liability protection. The number of shareholders is limited to 100 and their income and losses are included in their tax returns.
- Limited Liability Corporation (LLC) - a hybrid between a corporation and partnership. The number of shareholders is unlimited and each member or owner of LLC can take part in the business management.
For example, let’s say you want to start a business during college. One of the most common problems of students are essays, so you want to do something about it.
illustration by A D A M A S T O R
The best type, in this case, would be Sole Proprietorship. However, only until you want to expand the company. Then, there are two choices you can make. Switch to Limited Partnership, remaining the main owner and having control over the company. Or you could choose to become S Corporation, and become the biggest shareholder, while still having good liability protection.
2. Set up an operational entity
Now that you know what’s the perfect business structure for your company, it’s time to start. First of all, establish an operational entity. That means, in many cases starting as a Corporation or LLC is much more beneficial as compared to Sole Proprietorship. That includes tax rates, legal liability, and many other factors.
Usually, entrepreneurs start as a Sole Proprietorship. No wonder, it’s the easiest to operate and doesn’t require that much effort to establish. However, as mentioned in the previous paragraph, legal operational entities will gain you more profit. Also, what is even more important, they have much more opportunities and legal abilities to expand and attract investments.
3. Separate intellectual property
To avoid any personal risks in worst-case scenarios, separate the intellectual property. That includes all your personal data, your email, and your phone number. License a separate company phone number and email address, as well as any similar assets. It will protect you personally in case of any fraudulent activity against your entrepreneurship.
4. Organizational structure
Consider which departments will need to operate certain processes and create them. Divide the responsibilities between them equally. That way, each department will be responsible only for success or losses in their respectable operations. This is the most efficient and productive way to manage a company.
Come up with the leaders for each department. These need to be the most qualified specialists in each sphere. They will ensure the best performance of a department, as well as take responsibility for the actions.
5. Take naming seriously
Logically enough, everyone tries to name their business as they want. However, this may not be the best idea. Naming may seem like the least important point in establishing an entrepreneurship. But don’t underestimate its importance.
First of all, an unprofessional company name won’t be successful in attracting investments. Yes, it’s that simple. A decent, well-researched, and meaningful name for online paper writer can help attract funds. It’s the truth, well-known to many specialists in this field, but not known among beginner businesspeople.
Secondly, it’s the image of your company in the eyes of potential customers. They won’t trust your service or the quality of the products if the naming is wrong. There are plenty of professionals who provide help on naming your business the best way. You can search the internet and find out that countless companies around the world have failed. Only because the investors and customers didn’t want to interact with a business named a certain way.
Final words
Business is really hard to operate, especially if you’re a student. But after all, that’s why the science of economics exists. And while we mentioned only the very basics of structuring, you should research it much deeper. Don’t hesitate to hire experts to help you out in all fields. Of course, they may cost you extra, but in the end, it will ensure stability and additional profit for your company.
Don’t be afraid to make tough decisions and stay confident in what you’re doing. Good luck!
Comments