How To Structure A New Business
Are you considering a business venture and asking yourself how to structure a new business? Determining how to choose a business structure can seem stressful, with major consequences if you make the wrong choice. The good news is that your business and proposed role can largely determine which structure to choose.
How To Structure A Small Business
The key to choosing the right structure for your new business lies in expert advice. This will not only shed light on the right structure for you but allow you to set it up effectively and legally. In saying this, there are a few key things you can do that will help you determine how to structure your new business.
Determine Your Role & What You Want From Your Business
The first step to structuring any business is to have a clear understanding of what you want from it. Is this a passion project that you want to keep close to your heart? Are you interested in building a serious business with its own legacy? Are you merely looking for an extra source of income while keeping things quite small and easy to manage? Each of these business motivations can point to a different structure.
Once you know what you want to get out of your business, you need to determine what you want to put into your business. Do you see yourself on the ground and involved in the day-to-day operations, or controlling things from a distance? This is where business partners and ownership split can come into play. You need to determine what role you expect to have, the roles of your partners, and the amount of control and influence you intend to have over the business.
Sole Trader, Partnership, Company, or Trust?
Once you know what you want from your business and the role you want to play within your business, you can begin to understand the best structure for you. For a quick and easy set-up with simple management and the ability to build an income from day one, sole trader may be the right choice for you. For big picture projects, a company, trust or partnership is likely a better fit.
Discuss these options with your accountants and financial team. They will be able to guide you toward the best option for your business, explaining the positives and negatives of each choice. They can also help you set up and establish your operating entity.
Protect Yourself & Your Business
In business, there are many bumps in the road that can wreak havoc on your business and personal financial status. The structure of your business can protect you from this potential impact. Doing things such as establishing a trust and separating your intellectual property from your business can protect you and your business from potential threats down the line.
Consider Future Funding & Your Ability To Sell
Other important factors to consider when first structuring your business are the ability to secure future funding and sell. While you may not be considering these options from the outset, they are important to consider for the long term.
Certain factors such as the ownership split in your business can have a direct impact on your ability to secure funding or sell. Another factor that can impact both of these options a surprising amount is your business name. Ensure you choose something that won’t scare off investors.
Remember: Businesses Grow & Evolve
In all of this, it’s important to keep in mind that the structure you initially choose for your business may not work in the long term. Your business structure could look completely different in a years time depending on your business goals and needs. This can be a normal growing pain for new businesses.
The best way to ensure you’re on the right path is to consult an expert. Specialised financial advisors and business accountants will be able to advise you throughout this process while ensuring that your operations are legally sound. Book a free consultation with our business accountants and financial advisors to learn how to determine the legal structure of your business.
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