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In determining how to set up your own business, you can choose to create a sole proprietorship, a partnership or a corporation. The decision as to which is the correct structure for you will depend on things as tax implications and the degree of risk to your personal assets. You would be wise to hire the services of an accountant or lawyer who is conversant with needed governmental regulations.

Which of these structures should you choose when you set up your own business?

1. A sole proprietorship is a business owned by one person. The business does not have a separate legal status. A sole proprietorship is the least expensive and simplest way to set up your own business. There are few registration requirements and not a lot of expense to maintain it. The proprietor runs the business and collects the profits

Disadvantages to a sole proprietorship include the assumption of all risk, responsibility for all business debts and the risk of seizure of personal assets in the event of business failure.

2. A partnership is a relationship between two or more corporations or individuals who join together to profit from the operation of a trade or business. The partner’s share of income or losses is included on either a person or corporate income tax return. Partnerships are easy to set up and are flexible. A partner can provide additional skills and resources.
The disadvantages of a partnership include the risk of personal liability for business debts, and the issue of disagreements between partners causing problems in the business.

3. A corporation is a legal entity separate from its owner. It can own property and enter into contracts apart from its owners or shareholders. A corporation must pay tax on its net taxable income and file its own tax return. The owners have less liability and operating capital can be raised by selling shares.
Disadvantages of a corporation include onerous paperwork and regulations, complex tax rules, and complications to set up and maintain

The reasons for starting a new business may be many. If you want to be successful in your new business venture it’s all about doing the right things at the right time.

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