If you are planning to start a business, having the correct business structure is crucial for the success of your business. The following is an example of a business structure planning checklist and the factors you should consider in your decision-making process.
1. Determine the type of business structure
The first step in planning a business structure is to determine the type of structure that best fits your business needs. This can include sole proprietorship, general or limited partnership, private company, company limited by guarantee, co-operative, fixed trust or discretionary trust.
2. Research legal and tax implications
Consider consulting with a lawyer to understand the legal and tax implications of each business structure. This will help you make an informed decision that fits your specific business needs.
3. Define ownership and management structure
Decide on the ownership and management structure of your business, including who will have decision-making authority and how profits will be distributed.
4. Understand liability protection
Different business structures offer different levels of protection for personal assets. Consider the potential risks and choose a structure that best protects your personal assets in case of business lawsuits or debts.
5. Evaluate costs and administrative requirements
Each business structure has its own set of costs and administrative requirements, such as registration fees, taxes, and ongoing paperwork. Consider these factors when making your decision.
6. Research state-specific regulations
The requirements for setting up specific types of business structures may vary by state. Research the regulations and requirements for your state to ensure compliance.
7. Consider the long-term goals of your business
Your business structure can impact your ability to attract investors and expand your business in the future. Consider your long-term goals and choose a structure that aligns with them.
8. Consult with business partners or stakeholders
If you have business partners or stakeholders, involve them in the decision-making process to ensure everyone is on the same page and agrees with the chosen structure.
9. Obtain necessary licenses and permits
Depending on your business structure and industry, you may need to obtain specific licenses and permits before starting operations. Research the requirements and ensure you have everything in place before launching your business.
10. Establish an accounting and bookkeeping system
Your business structure will impact how you track and report financial information. Set up an accounting and bookkeeping system that aligns with the chosen structure.
11. Review and update your business structure as needed
Business structures can change over time as the business grows and evolves. Review your structure regularly and make changes as needed to ensure it continues to meet your needs.