If you want to be a successful business leader, then you’ll need to know how to structure your business. Your business structure will have a role to play in how much you pay as taxes, as well as your liability. Some business structures, such as sole proprietorships, are managed by one owner. If more people are involved in running your business, then you’ll need to choose a different business structure.
Choosing the right business structure is essential, as it can have a direct impact in how you operate your business. Here are nine tips on how business owners can choose the right business structure for their businesses:
1. How Involved Will You Be
The first thing you need to determine, as you try to develop your business structure, is how involved you intend to be. Will you be managing daily operations? What about billing and payroll? What will be your role in the business, and how much responsibility will you carry?
You should also consider whether you’ll be partnering with anyone else for your business. If one or more partners are involved in managing your business, then you can’t operate as a sole proprietor. Also determine at this time, how much control you want to have, over business operations.
Answering these questions will help you determine what kind of business structure would be most apt for your business.
2. Keep Business and Private Matters Separate
When you’re structuring your business, consider keeping your private matters and property, separate from the business. This will enable you to better protect your assets, especially in the event of some kind of lawsuit, where they might be taken. Keeping your intellectual property separate as well, is a good idea.
Examples of intellectual property that you should keep safe include web addresses of your business, as well as business phone numbers. It’s possible for a competitor, in the event of a lawsuit, to legally take over your business web address and phone numbers. This can, however, be protected by structuring your business the right way.
3. Structuring Your Business
Structuring your business is essential, even if you are a freelancer. Making yourself a separate legal entity from your business, by filing for an LLC, can help you protect your business better. That’s why, no matter what stage you may be in, when it comes to growing you business, structuring it is important.
4. Personal Factors
Every business structure, will be unique to the needs and life of the entrepreneur that runs it. Take for example a situation where a business owner wants to move abroad, with the intention of continuing their business from there. In this instance, the business owner would need to structure their business in a way, where cross border transactions are doable. They will also need to comply with business and tax regulations in the new country as well.
In this way, every entrepreneur will have unique life conditions that will have a say in how they structure their business.
5. Consider Funding
A lot of the decisions business owners make when they start a new business, affects their finances later on. Consider thinking about what kind of funds you could need to grow and develop your business, around four to five years in the future. This can enable you to create a financial plan that can help you secure this finances.
You could look for funding from investors, as well as banks. You could also consider getting one or more partners, in order to pool funds. In case some of the partner don’t want to have liability when it comes to the business. Then you can structure your business as a limited liability company. Keep your finances in mind when you structure your business, and this will help you reach your financial goals better.
6. C-Corps and Investments
Many people want to structure their businesses like an LLC, due to the benefits it offers when it comes to taxes. However, if you have the intention of sharing stocks with employees, or raising capital to grow your business, then choosing the C-Corp business structure could be the most beneficial.
While it’s possible to change your business structure from an LLC to a C-Corp, it will take time and money. That’s why it’s a good idea to consider the future, when you choose your business structure.
7. Majority Shares in Business
If there are partners involved in your business, then one person should always have a majority share. Splitting things equally doesn’t always end well, and you could end in a deadlock should you both disagree on something. Having a partner have a majority share even say 51% of the company, provides them with the authority to take a leadership role in running the business.
8. Choosing an LLC
If you don’t know what business structure would be ideal for your company, then always consider choosing to go with an LLC. This is provided you don’t have any intention of raising venture capital later on. The reason why many business owners want to go with an LLC is as they are both easy to create, as well as to manage.
In case your business takes off, then you can always upgrade your business structure to S-Corp, or even as a C-Corp, later on. Given that not many businesses take off, choosing to structure your business as an LLC can help you to get by with a workable and good business structure.
9. Innovative Business Structures
As a business owner, you can build and develop your business, any way you want to. Traditional methods of running an organization don’t work well in attracting and retaining the best talents, to your business. Instead, opt for a business structure that allows you to create a more collaborative and productive environment at work.
Such business structures make people feel as if they are important parts of the organization they work in. This can go a long way towards ensuring that your employee retention rate is high.
How you structure your business will have an important role to play in how you run and manage your business. From filing taxes, to determining who has liability over the business and its matters, business structures are important to get right. Use these tips to choose the right business structure for your business.
As a business owner, you should also consider business insurance Australia. This is as, you are exposed to certain risk factors, that could affect your business and your finances. Take for example, if you get sued by a disgruntled client or customer. You would have to defend yourself in an expensive lawsuit, and you would have to spend exorbitant amounts to defend yourself. If you had business insurance, then you can get financial coverage, and won’t need to use your liquid capital. Small business insurance can help business owners protect themselves, and their businesses. If you want to learn more about business insurance Australia, click here.