📕 Node [[how to organise the business]]
📄 How to organise the business.md by @dr_kvj

Types of organisations:

  1. Sole proprietorship : You are the firm
    1. Advantages :
      1. Easy
      2. Full control
    2. Disadvantages :
      1. Full liability - Extends to even the actions of the employees
      2. Investors see this is as high risk and hence will hesitate to invest
  2. [[General Partnership]] : : Partners together are the firm
    1. Advantages :
      1. Can borrow more loan , two or more credit scores now
      2. Shared responsibility
    2. Disadvantages :
      1. Unlimited liability , including each other’s obligations
      2. power struggle / disagreement
  3. [[Limited (liability) partnership]] : General partner is the firm , other has limited liability
    1. Advantages :
      1. Raise money while the General partner has full power / rights
      2. Repayment of this capital is not tied to interest rates , as would be the case of bank loans. It is rather tied to business profits
    2. Disadvantages :
      1. Only the limited partner is free of liability . The general partner has all the liability - similar to sole proprietorship / general partnership ^dd82ab
  4. [[Limited liability company]]
    1. Advantages :
      1. Limited liability
      2. No corporate taxes
    2. Disadvantages :
      1. Should look into it . #question
  5. [[Corporation]] : Corporation is the firm

[[Partnership vs corporation]]

Clinchers

From Top to Bottom : ⬇️ Flexibility and control over business matters (especially with many investors / [[shareholders]]) ⬆️ Ease of taking investments

[[Limited liability company]] and [[Corporation]] have a lot of formal reporting requirements both at state and federal level (central)

Advantage common for all partnerships. :

  • Taxation is only at the personal level ( personal income tax), the business doesn’t have to pay taxes on revenue . ^98e002

How to choose ?

  1. Complexity
  2. Liability
  3. Taxes
    1. Small businesses should avoid being taxed twice , hence corporation isn’t ideal
    2. Many accountants typically advise partners to claim quarterly or biannual advances to minimize your return’s end effect.
  4. Control
    1. Sole proprietorship or an LLC is best suited for startup owners who want to maintain sole or primary control over the company and its activities, but this can also be negotiated when developing a partnership agreement.
    2. In the beginning , its still the same for corporations , but once the business scales it will become more board directed .
    3. Even for a small corporation , all the rules like board meetings and minute keepings are necessary.
  5. Capital investment
    1. Best favored is corporation
    2. LLC is second best favored by investors
    3. Partnerships and sole proprietorship have a very hard time finding funds from outside

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