Structuring a building or a business depends on the risk you are willing to take. A building can be like the PETRONAS TOWER or a single concrete structure that stands tall. There are four best chosen legal structures for company formation. The four structures with their advantages and disadvantages are listed below.

Property:

This is the most common and simple structure, which is popular with individual business owners. It gives you the freedom to present your expenses and income from your personal income tax return. In this way, any business loss that may occur will be offset by income you have earned from other sources if necessary.

Likewise, you have a lot at stake when seizing your property in the event of bankruptcy or being sued. This structure is best for testing your business concepts or if you have no personal assets. One like consulting firms and other service providers where none or only a few employees are part of the organization without such asset investments.

camaraderie:

If you’re confident in your idea but haven’t invested, be sure to collaborate with someone. This structure is divided into general and limited partnership. A general partnership bids farewell to a creditor at any time after any or all of the partners.

While a limited partnership caters to a general partner with unlimited personal liability and full limited partners, the liability is generally limited to the amount they have invested. You must report your gains and losses on an informational tax return and complete it with your personal tax return.

It’s a low-cost business and you can take advantage of your taxes with profit and loss sharing on your tax return. The only demerit it offers is for the general partners who always take the risk even if other partners go down the business. The best in the real estate industry.

Corporation:

The most prominent and growing structure of the current era. All the big corporations and big investors in the business world are examples of this structure. It is a separate legal entity that is separate from its owners and you do not necessarily need to risk your personal assets beyond the limit of your investment in the corporation.

These corporations have S class and a Mercedes C class, S class is the most common with the limitation of 100 shareholders and C class is for high profile companies. A board of directors is responsible for these corporations.

As with its size, it includes a large investment and with that, the investment comes with a high risk. Account for more tax returns and other legal formalities. This structure suits manufacturers and restaurant chains.

These corporations are part of a large group of investors owned by Family Business or Private Limited Company. Therefore, those who are interested in business life and business career. Then they should not shy away from limited liability company registration and start their company on a positive note.

Limited Liability Company:

This structure was developed for the sole principle of avoiding double taxation. It shares its merits with the property of the gains and losses that are transferred to the owners and included in the personal tax returns. It is better than a corporation in liability protection and unlimited shareholders.

The only demerit that it entails is paying the self-employment tax on its part of the draw depending on how the entity decides its taxation. This structure is encouraged and welcomed by companies to welcome foreign investment. The Special Economic Zones are the best place to land in these projects.

If you invest in a foreign country, then you need to collaborate with a local citizen and make them the representative for all the drafting of your legal documents. He/she will be the partner of 51% of the shares of your company and the only part of the profits. Best for startups that are willing to test their ideas with less risk and expense.

Every business has its risk factors involved, careful planning, operational excellence and execution with detailed market research all contribute to business success. It is important for the owner of a business, a wise decision that helps cover the risks and minimize their impact on the company.

I hope this article has covered all spheres of business structures and helps you choose your best structure. For more help, contact us and get professional help from the experts.