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Throughout most parts of world, three predominant main types of legal business forms are used to run small business organisations.
Countries choose different ways of organising the legal business structure of the
business life. Therefor you have to contact your local authority in order to
find out how your country organise the business society.
Three main types
Three predominant main types of legal business forms
are used to run small business organisations. These forms are as follows :
- Sole proprietorship - where generally only one person funds the business
activities
- Partnerships - where two or more people band together to finance or run a
venture
- Corporations/limited companies - where it is possible for only a few
friends /family members up to many thousands to subscribe for a share in
business ownership
Legal Business: Sole proprietorship
The vast majority of new businesses are set up as sole proprietors. The legal business form
is normally formality-free, there are no rules about the records you have to
keep.
Nor is there a requirement for your accounts to be audited, or for financial
information on your business to be filed at the registrar of companies. You
still have to pay tax from the profit.
The biggest disadvantage of being a sole trader is that your are totally
responsible for any debts your business incurs. If you go bankrupt, your
creditors are entitled to size and sell your possessions-personal as well as
business.
Legal business: Partnerships
Partnerships are effectively collections of sole proprietors and, thus, there
are legal issues related to personal liability. There are very few restrictions
to setting up a business with another person (or persons) in partnership, and
several definite advantages.
By pooling resources you may have more capital. You will be bringing, several
sets of skills to the business. If you get ill the business can still carry on.
The biggest disadvantage is if your partner makes a business mistake. Perhaps
by signing a disastrous contract, without your knowledge or consent.
Every member of the partnership must anyway shoulder the consequences. Under
these circumstances your personal assets could be taken in order to pay the
creditors. Even though the mistake was no fault of your own.
Legal Business: Limited Liability Companies
As the name suggests, in this forms of business your liability is limited to
the amount you contribute by way of share capital.
A Limited Liability Company is a separate legal entity. Distinct from both
its shareholders, directors and managers. The liability of the shareholders is
limited to the amount paid or unpaid on issued share capital.
However, many restrictions are put on the company. It must maintain certain
books of accounts. Appoint an auditor and file an annual return with the
registrar of companies which includes the accounts as well as details of
directors and mortgages.
The biggest disadvantage is that it is more expensive to set up and there are
more rules to follow.
How you actually register your company depends on the country you live in.
Contact the authority for further information. - Go to next
business issue: Paper Work
- Info about Start
of business in India
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Copyright © 2009 Dynamic Business Plan 07-02-2012
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