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Your choice of structure can greatly affect the way you run your business, impacting everything from liability and taxes, to control over the company.

Wherever your interests lie, it's almost guaranteed that there's a way to turn it into a business. Starting your own business is a great idea. It takes a lot of time, dedication, planning, analysis, studies and a lot many more things. Maybe there's something you're really knowledgeable and passionate about, or perhaps you think you've found a way to fill a gap in the marketplace. But whatever business you choose to do, you need to decide which legal form of business will be best for you. which will be most beneficial and aiding to your cause and also the scale of the business.

The legal structure you choose for your business is one of the most important decisions you have to make in the startup process. Your choice of structure can greatly affect the way you run your business, impacting everything from liability and taxes, to control over the company. The key is to figure out which type of entity gives your business the most advantages when it comes to helping you to achieve your organizational and personal financial goals.

For new businesses, it's not always easy to decide which one to choose. You need to consider your startup's financial needs, risk and the ability to grow. And if you already have a established business, you might also need to switch to another structure to catapult your growth.

Factors needed to be kept in mind


In regard to startup and operational complexity, there is nothing simpler than a sole proprietorship. You simply register your name, start doing business, report the profits and pay taxes on it as personal income. However, it can be difficult to procure outside funding. Partnerships, It can also be formed without even a signed agreement or document.Under LLP, you get flexibility of a partnership and also offer a degree of liability protection. on the other hand, require a signed agreement to define roles and percentages of profits. Companies have various reporting requirements with the governments.


A corporation carries the least amount of personal liability, since the law holds that it is its own entity. This means that creditors and customers can sue the corporation, but they cannot gain access to any personal assets of the officers or shareholders. An LLP offers the same protection, but with the tax benefits of a sole proprietorship. Partnerships share the liability between the partners as defined by their partnership agreement, it can be equal or in some specified ratio. But, liability of a sole proprietor is unlimited.  Even proprietor’s personal asset can be attached to pay off business' liabilities.


If it is important for you to have sole or primary control of the business and its activities, a sole proprietorship might be the best choice for you. You can negotiate such control in a partnership You can even have sole control if the all the partners agrees to it and can also result in conflicts for control in the absence of a signed deed. Under LLP also, you will be having similar conditions like partnership. In a company, control is based on shareholding. Company is constructed to have a 'Board' which takes all the major decisions. As it grows, operative control of the business shifts in the hand of board.


If you need to obtain outside funding sources — like investor or venture capital, bank loans etc. — you may be better off establishing a company, which has an easier time of obtaining outside funding than does a sole proprietorship. Corporations can sell shares of stock, securing additional funding for growth, while sole proprietors can only obtain funds through their personal accounts, using their personal credit or taking on partners. An LLP and partnership can face similar struggles, although, as its own entity, it is not always necessary for the owner to use his or her personal credit or assets.

If you want to keep it small and simple, and do not want to indulge in much legal requirements, you can choose sole proprietorship. This is the simplest form of business entity, and it is used by more than 70 percent of businesses. If you are having shortage of funds or want to start jointly in partnership with someone, you may opt for partnership, which is owned by two or more individuals. You want your business to be more organised than this but still with much less legal obligations, Limited Liability Partnership (LLP) is best for you. In this you can enjoy flexibility benefits of a partnership and if you are planning to go for at big scale, forming a company is best suitable for you.

In some businesses you are required to choose some specific structure whereas some allow a flexibility in that case. so, it is essential to go for the best legal structure for your organisation.

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one-man organisation where a single individual owns, manages and controls the business


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Limited Liability Partnership

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