A business structure is one of the most important aspects in the development of a small business. As your business grows the business structure may evolve and change. It is important to know what your business will be at the start and how it will progress. Important factors to consider in choosing your business structure include the size and nature of your business, the tax implications, the vulnerability to lawsuits, and your expected profit or loss.
If I was going to start a small business; let’s say an auto repair service station I would begin by deciding on the size of my business, then choose if I was going to have others involved in my business, decide how much control I would want, decide on the business’s vulnerability to lawsuits, decided on the expected profits. I would want to start with one shop to begin with then expand to about 10 stores over about 3 counties. Since I would want to expand I would have other experienced auto technicians to go into business with me. I would start with 2 other owners. I would not want to be personally responsible or liable in case if anything happened at the business. I would expect medium profits. Because of my decision I would form a corporation. Once I have decided to form a corporation I would write the articles of incorporation and by-laws for my small business. As the business grows and more stores are opened then the number of stockholders could increase.
The structure that offers the most benefit to the owners depends on the individual circumstances of the small business. There is not a one type fits all. Each structure has benefits for the owner. The proprietorship would have the most benefit if you were not concerned about the business ending with the death of the owner, because it is the simplest to form, run, and end. The sole proprietorship has the good tax advantages and the owner receives all of the profits.
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