Choosing A Business Entity

Why Are Business Entities Important?

It is important for business owners to understand the main differences between business organizations and which business organization is best for them as it affects:

    • How the business is taxed.
    • The business owners legal liability (For more information see our Article on Limited and Unlimited Liability).
    • Costs of forming the business.
    • Operational costs.

The 4 main types of business organization

  1. Sole Proprietor.
  2. Partnership.
  3. Limited Liability Company.
  4. Corporation.

We give you a Clever overview of each of these business forms under our ‘Business Entities’ category.

Choosing a Business Entity

Which type of business structure to use depends on many things including the type and size of the business, the number of people involved etc.

Factors to consider when choosing a Business Structure:

  • Liability and the amount of risk the owners may be exposed to.
  • The different tax rules and amount of tax paid for the different business entities.
  • The level of complication of setting up the business.
  • The cost of setting up the business.
  • The number of people involved and the different management systems.
  • The life of the business.
  • How easy it is to end the business or sell it.

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Posted in Business Entities, Business Law, Entrepreneur.