When starting up a business, you must know your options. One of the central business structures that requires one to gain insight before a startup is corporations. The most common ways to organize any company are having a sole proprietorship, partnership, corporation, profit or a nonprofit, cooperative, and so on. It's more challenging to have a corporation structuring without the correct information due to the many overlapping and ambiguous lines. Therefore, it pays to consult with corporate lawyers, accountants, and other essential business counsellors.
Factors To Consider For A Corporation Structuring
The business structure you choose influences your daily operations. Proper structuring means having the right balance in any legal issue and the benefits you get. The best system depends on three main factors:
- The type of business you run
- Whether you will own it or how many owners it has
- Its financial situation
Since business needs differ, every business owner must make sure they pick the proper structure that suits their business. While forming a good business structure may seem easy, starting and operating a corporation is complicated and expensive. That's why it's advisable to seek advice from the best corporate law firm to learn the risks and liabilities involved, the income tax situation, and the like.
Below are the most important factors to consider:
- Investment needs: Though the cost of forming a corporation is high compared to other structures, corporations have the most robust protection for their owners. When it comes to raising capital, corporations have an advantage as they can do this through selling stock. In this way, they attract employees.
- Expenses to spend in establishing or maintaining the structure: While it's easy to form a sole proprietorship or a partnership, a corporation's structuring is more expensive. It's also challenging to maintain. There is a certain amount to be paid when forming a corporation, which is different in each state. In Australia, the cost may range from $417 to $506, depending on the business. A corporate lawyer can advise on the amount needed for a corporation's structuring. Another task for anyone setting up a corporation is to elect officers to run the company. In addition, they also have to maintain records of vital business decisions and follow any legal formalities.
- Transfer of ownership: One good thing about a corporation is that you can change your mind. The choice you may make is not the final. The fact is that the business structure you startup with may not meet your future needs. If you start a partnership and later decide to grow your business or the risk of personal liability increases, you can easily convert it to a corporation.
- Incomes taxes: Unlike other structures, such as sole proprietorship, corporations pay their income tax from profits using a new flat tax rate of 21%. Though their income is taxed twice- when they make profits and dividend payments to shareholders, this may help them have a lower combined tax bill than those who have unincorporated businesses earning the same profits.
Setting Up A Corporation
Preparing the incorporation articles is one of the first steps required in any setup. Your attorney can help you complete the necessary forms. The corporation will require a set of bylaws dictating how the corporation will run, the directors and shareholders' rights and responsibilities, or any other essential details needed to run the corporation. If you fail to follow the set rules of incorporation, the court may hold you and other company shareholders responsible for debts that may be recovered from your personal assets. That's why one needs an expert to help choose the best ownership structure for your business. With this, you should be conversant with what laws to follow and how to keep accurate financial records, clearly showing the separation of the owners' incomes and that of the corporation itself.
How Can A Corporate Law Firm Help Me?
Every business has unique needs, depending on the type of corporation and the business structure involved. You cannot make a choice based on other people's decisions. You should consider the unique needs of the business and its owners. Since this may be challenging for a layman, seeking expert advice is advisable. Getting legal advice for corporation structuring would help as the lawyer may provide real scenarios and demonstrate how they can work for your type of corporation. This may result in a smooth and faster process. You can choose the proper structure if you know your situation's benefits and possible risks. Also, you eliminate any chance of missing vital details in your state's law. The information helps you prepare the relevant paperwork for a solid start.
