Every entrepreneur out there must know the basic forms of business entities available, which include sole proprietorship, corporation, general partnership and limited liability company (LLC). By taking a closer look at complexity, liability protection, ease of setup and taxation, the same entrepreneurs will instantly realize that certain structures provide more benefits than others do. This means that choosing the right type of entity represents a major decision that no start-up should ignore. Selecting, planning and organizing the specific business form ideal for your needs all represent steps from a complex process that requires maximum attention and leads to various questions that need answers. This article has the purpose to facilitate the mission off all start-ups out there by providing accurate information regarding each type of business structure along with its advantages and disadvantages.
Sole proprietorship and general partnership
It does not matter if you decide to set up a company in Singapore or in other part of the world because the main idea is that you have to examine the same business entities available. Starting with sole proprietorship, we have to say that it truly represents the simplest business form that you could possibly choose. However, you should also know that by choosing this option, your business would not become a legal entity. You, a natural individual, are the owner of the business and you are liable for all its debts. In what concerns the name of the business, you can use your own name r choose a fictitious one. For such a business structure, you only need to register your name and obtain local licenses. On the other hand, general partnership refers to the involvement of two or more individuals in the same business. Normally, all the persons involved, also known as co-owners, will enjoy equal amount of profit. A general partnership comes with flexibility and simplicity in what concerns organization and operation. Apart from general partnership, there are other forms available including Limited Partnership and Limited Liability Partnership.
Corporation and Limited Liability Company (LLC)
When it comes to corporation, you have to recognize several types, namely C Corporation, S Corporation and Non-profit. Regardless of the type of corporation, it comprises directors, shareholders and officers. The shareholders choose the board of directors, who need to make important decisions and set clear business objectives. Directors nominate the officers, who must take responsibility for daily business management. Shareholders enjoy protection from any claims that target the respective corporation. If shareholders decide to leave the corporation, their rights become transferable meaning that they have the ability to designate someone else who will take care of the business. Limited Liability Company or LLC has become a popular business structure in the last years due to the benefits that it offers to its members. It practically gives them protection for all personal assets by not making them liable for any taxes. In order to form an LLC, you have to deal with the Secretary of State and register your business. If the business has multiple members, they all need to agree on the same decision.