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How do you choose the right structure for a new business?

On Behalf of | Dec 23, 2021 | Business Law

Once you have an idea for a business, you have to start making practical decisions about what that company would look like and how it would operate. You need to look at likely costs and determine if it is possible to make a profit. You also need to explore the existing competition to see if you can meet their prices or exceed the goods and services they offer consumers.

One of the most important decisions you will make during the planning stages of business creation is the decision about what form your company will take. There are numerous business structures available, ranging from partnerships to nonprofit corporations. How can an entrepreneur aiming to start a new business choose the right structure for their company?

Establish a realistic five-year plan

Very few things are predictable in business, so your business plan may be more estimate than road map. Still, when you have a rough idea of what you would like your business to do can help you explore what kind of liabilities you may have and what kind of support you will need.

Thinking about what you would like to have happen can help you put the right systems and protections in place to make that plan into reality.

Consider your funding and the other parties involved

Do you hope to bring in outside investors? A corporation may be a good choice in that situation. On the other hand, if you want to partner with a specific investor who has helped you develop your business concept, a partnership may be the better solution.

The role that you want other people to play in your company, the level of personal responsibility you want for daily operations and the amount of control investors expect for their financial contributions will all influence which structure is right for you.

Focus on goals and also on risks

When establishing your business, you want to create a structure capable of achieving your business goals. At the same time, you want to optimize your personal protections for legal and financial risks related to the company.

Exploring your business concept in depth can help you decide what structure is best for your concept.