Do you want to start your own business? Congratulations! You’re on to something big—people like you are fuelling the economy. To get you started, we’ll go over the types of businesses. Before committing to one of the business types listed below, you should develop a business plan to help you better outline your goals. Also, look into advantages and disadvantages of gst on business.
What kind of company should you start?
One of the first challenges for new entrepreneurs is determining what type of business to register. Although there are numerous business types, selecting one does not have to be difficult. Here are the seven most common business types, as well as some questions to help you decide which one is best for your startup:
- Sole Proprietorship: This is the most basic type of business. Sole proprietorships are owned and operated by a single person and are extremely simple to establish.
- A partnership: is a business owned by two or more people who share profits and responsibilities.
- A limited partnership: is a business partnership formed by business owners and investors.
- Corporation: A type of fully independent business with shareholders. One of the most complicated business types.
- Limited Liability Company (LLC): A hybrid of a partnership and a corporation designed to make it easier to start small businesses. One of the most common types of startups.
- Nonprofit Organization: A business that uses its profits for charitable purposes. Tax-free, but subject to special rules.
- Cooperative (Co-op): A business owned and operated for the benefit of the organization’s members who use its services.
Choosing the Correct Type of Business
The business structure chosen by a startup can have long-term consequences for how the business is run and operated, including how it files taxes and whether it can hire employees. We’ve created a flowchart to guide you through the decision-making process to help you decide:
When deciding on a business type, you must make the following decisions:
- Debt and Liability: The personal liability associated with a sole proprietorship or partnership is accepted by most small businesses and start-ups as a necessary risk of doing business. The disadvantage is that this usually necessitates more paperwork, costs more to register, and may necessitate more reporting or upkeep than simpler business types.
- Filing your taxes: Impact of gst is huge when it comes to filing your business taxes, you have two options. You can report business profits and expenses on your personal tax returns, or you can have your company file taxes as a separate entity. Most small business owners prefer to file taxes on their own returns because it is easier, but filing business taxes separately can help you keep your personal and business finances separate.
- Hiring employees: Simple business kinds, such sole proprietorships, can be difficult to hire later. With or without staff, a more formal business structure like an LLC or corporation may be better future-proofed.
After deciding on the appropriate business model for your firm, you may need to fill out extra documents depending on your state and local legislation. There are many books and resources on this. Many of them suggest starting with the Small Business Association, which has local offices. Finally, research your local and state rules surrounding home-based businesses, as zoning laws can sometimes influence the type of business you develop.