Business Ownership Selection

Date: 2015-10-07; view: 656.

Before you enter the complex arena of business and its myriad of laws which influence your freedom of choice and mobility of action, you must first choose the legal structure for your business that will best suit your needs and the needs of your particular business. In order to intelligently select the legal structure for your business, you must ask yourself, "What are my alternatives?"

There are many reasons today for owner or would-be owners of businesses to look at the legal structure of their firms. The changing tax laws and fluctuating availability of capital are just two situations which re­quire alert managers to review what legal structure best meets their needs.

There are three principal kinds of business structures: the sole proprietorship, the partnership and the corporation (the sole trader, the partnership, the company, joint stock company). Each has certain general advantages and disadvantages, but they must all be weighed to reflect your specific cir­cumstances, goals and needs. Which of the forms is right for your business depends on the type of business you are going to run, on how many owners you have and on your financial condition. There is no unequivocal choice that would suit every business. Business owners have to pick up the structure that best meets their needs. There are several of the most important factors to consider:

· potential risks and liabilities of your business;

· formalities and expenses involved in establishing and maintaining the various business structures;

· your income tax situation;

· your investment needs;

· degree of control over the business you wish to retain;

· possibility of transferring your ownership; and

· degree of secrecy.

To appreciate these considerations we shall examine each form of ownership in relation to these important factors.