The idea of generating a product or service that benefits our community is something to get excited about. This is why many people choose to start a business.
While the idea of working for yourself may sound tempting, before taking the plunge its best to understand the plethora of important decisions that await you. If you don’t fully take these matters into account, then you may wind up in a tricky financial predicament further down the road.
One of the biggest, and earliest, decisions you’ll have to make as a business owner is which business structure you will utilize. There are many legal structures to choose from, and each has its own advantages and disadvantages.
Sole proprietorships, for example, can give you the most amount of freedom, but they also leave you exposed to the most amount of liability. If the idea of being personally liable for your business’s debts doesn’t appeal to you, then you may want to consider a limited partnership.
With this business structure, partners can come together to form a business, but one or more of those partners are only liable up to the amount that they invested.
So, then, how does that relate to control of the business? It really depends on how the business’s operations are laid out on paper. More decision-making power may be given to those general partners who have unlimited liability. Moreover, access to the business’s income may be restricted based on each partner’s percentage of contribution to the business’s formation.
Although it may not seem like it on its face, business formation and planning is highly customizable to meet an entrepreneurs needs. However, the initial documents that are used to create a business, including those related to a chosen business structure, need to be carefully crafted so as to start the endeavor off on the right foot. Failing to do so could result in a business structure and operations model that stifles creativity, growth, and success. Therefore, before moving forward with business formation, it’s a good idea to work closely with a professional who can help you come up with a solid strategy that lays the foundation for success.