Structuring a building or a company depends on the risk you are willing to take. A building can be like PETRONAS TOWER or a single tall concrete structure. There are four legal structures that are best chosen for company incorporation. The four structures with their pros and cons are listed below.
This is the most common and simple structure, which is popular with individual business owners. It gives you the freedom to report your expenses and income from your personal income tax returns. In this way, any business losses that may occur will be offset by income you have earned from other sources if necessary.
Similarly, you have a lot at stake in having your property seized in the event of bankruptcy or being sued. This structure is the best for testing your business concepts or if you don’t have personal assets. One like consulting firms and other service providers where no or only few employees are part of the organization without such investments in assets.
If you trust your idea but have no investment, be sure to collaborate with someone. This structure is bifurcated into a general and limited partnership. A general partnership offers at any time the dismissal of a creditor after some or all of the partners.
While a limited partnership allows a general partner with unlimited personal liability and full limited partners, the liability is generally limited to the amount they have invested. You must report your gains and losses on an informative tax return and complete it with your personal tax return.
It is a low cost business and you can take advantage of the tax benefits by sharing the profits and losses on your tax return. The only demerit it offers is to the general partners who are always at risk even if other partners sink the company. Best in the real estate industry.
The most prominent and growing structure of the current era. All the large corporations and large investors that exist in the business world are examples of this structure. It is an independent legal entity that is separate from its owners and you do not necessarily need to risk your personal assets beyond the limit of your investment in the corporation.
These corporations have an S class and a C class for Mercedes, the S class is the most common with the limitation of 100 shareholders and the C class is for high profile companies. A board of directors is responsible for these corporations.
As with its size, it includes a large investment and with that, the investment carries a high risk. Account for more tax returns and other legal formalities. This structure suits manufacturers and restaurant chains.
These corporations are part of a large group of investors owned by the family business or private limited partnership. Therefore, those interested in business life and the entrepreneurial career. So you should not shy away from the Private Limited Company Registration and start your business on a positive note.
Limited liability company:
This structure was developed with the sole principle of avoiding double taxation. It shares its merits with the property of the gains and losses that are transferred to the owners and included in the personal tax returns. It is better than a corporation in liability protection without limit of shareholders.
The only demerit that comes with it is paying self-employment tax on your share of the draw, depending on how the entity decides your taxes. This structure is encouraged and welcomed by companies to welcome foreign investment. Special Economic Zones are the best place to land on these projects.
If you are investing in foreign land, you must collaborate with a local citizen and make him the representative for all the writing of your legal documents. It will be the partner of 51% of the shares of your company and the only participation in the profits. Best for startups who are willing to test their ideas with less risk and expense.
Every business has its own risk factors involved, careful planning, operational excellence, and execution with detailed market research contributes to the success of the business. It is important for the owner of a business, a wise decision that helps to cover the risks and minimize their impact on the company.
I hope this article has covered all the spheres of business structures and helps you choose the best structure. For more help, contact us and get professional help from the experts.