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Business Structure Basics

Structure in any business is good for the smooth running of its processes and operations. It helps you to get the best tax breaks for your business which is very essential at the initial stages of business. Every new business needs to avail the best tax saving options so that the money is not eaten up by the tax laws of the government, but utilized for the growth of the business.

Entrepreneurs first need to understand what kind of business structure will theirs fit into. The different kinds of business structures are

Sole proprietorship: Here a single business owner is responsible for the whole business. It is the easiest way to set up the business because the formalities are minimal. You just need to get a business license and a permit at the place where you will start the business.

Partnership: This form of enterprise is also relatively easy. There are no extra costs and the formalities are also minimal. Details as mentioned below needs to be put down in detail to avoid confusions and clashes later on.

  • money invested by each partner
  • responsibilities and rights for each partner
  • profit/loss sharing
  • Authorization of business processes
  • dissolution details

LLC - Limited Liability Company. This is a new form of business enterprise. Here the owners are protected from personal liabilities towards company debts. The tax systems are simpler than that of a corporation. This form of a structure is beneficial for small businesses.

Corporation - A corporation is a body that governs the business completely. It has a long life, in the sense that even if the owners leave or pass away the corporation can be taken over by others. The corporation is run by shareholders who are governed by a board of directors. By selling stock of shares a corporation can easily raise capital. It is protected by legal norms and comprises of many formalities legal and business.

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