- There are generally 5 types of business structures you can choose from if you’re starting a new business:
- Sole-proprietorship
- General Partnership
- Limited Partnership (LP)
- Limited Liability Partnership (LLP)
- Limited Liability Company (LLC)
- To decide which business structure is most suitable for you, you will need to consider the following factors: –
- How much capital you are prepared to invest?
- How many owners there will be in the business?
- What liabilities and responsibilities you are prepared to assume?
- What risks you are prepared to take?
- Whether a company of that structure will be easy to close?
- Some of the main features of a Sole-Proprietorship include the following: –
- Sole-proprietorship:
- This is a business that is owned by a single person.
- The sole-proprietor has absolute say in the running of the business because there are no partners involved.
- However, a sole-proprietorship is sometimes considered risky because it does not offer any protection of the owner’s personal assets from business risks and liabilities and the owner will be personally accountable for all the debts and liabilities relating to his business.
- This means that creditors will be entitled to claim their debt from the owner’s personal assets if the sole-proprietorship’s business assets are insufficient to pay its liabilities.
- Nevertheless, you can consider using a sole-proprietorship if you are the sole owner of a small business which does not have much business risks.
- Sole-proprietorships are easy to set up, maintain, manage and terminate because there are fewer administrative requirements.
- Sole-proprietorship:
A sole-proprietorship is not a separate and distinct legal entity. As such, it is not entitled to sue and be sued in its own name or own land in its own name. In addition, it will not have perpetual succession (i.e. it will terminate upon the death or departure of the owner). This is because only entities with perpetual succession can continue to exist and operate upon the death or departure of the owners without having to transfer property whenever there is a change of its ownership.