What does business structure mean?
Business structure often refers to incorporation and is a term used to describe the legal status of an organization or company. It is vital that you choose the structure of your business before you start trading, and the different options vary in set up costs as well as in the way the business will be run. It will also have a huge impact on your tax bill now and for as long as the business is in operation. Additionally, your choice will impact your own level of liability in the company, the amount of paperwork that will be required to remain compliant with regulations, and your ability to raise money for the business.
The different types of business structure are the sole trader, partnership, cooperation, company, trust, and association. As a new business owner, the sole trader is the simplest and most cost-effective structure to use. A partnership will involve between two and twenty people going into business together, a company being a separate legal entity that will hold its own assets. Trusts, on the other hand, are not legal entities, and associations being the best choice for non-profit run organizations.
While it is possible to change your business structure, it is best if you can decide on the best structure for your business at least for the coming several years. If your business then outgrows your choice you can make a change at that time. Remember too that you’ll have to consider your tolerance for administrative paperwork, your own personal tolerance for risk, and your long-term goals for the business.