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Organisation and Structure - blog

Picking the right kind of business

So you’ve decided to start a business.  Great! What kind of business are you going to be? A sole proprieter? A partnership? A company? A limited company? Each one of these is just a legal model that best suits your business.  As a sole proprieter you establish a business with you as the head.   You are then responsible for all debts and liabilities of that business.  A partnership is a more suitable Structure if you share the business with one or more people, even if they are silent partners and don’t participate in the day to day decisions of the business.  You need to have the terms of the partnership drawn up so that each shareholders responsibilities and liabilities are clearly defined. Also what happens if one person wants out!   A company is a more formal structure and you need to establish a company to do this with appointed directors and a chairperson.  Your lawyer, or your accountant can help you with this.  Having a limited liability company means that there is a limit to how much liability the company can be subjected to but it does not absolve you from having to act lawfully. In the case of a company the directors have responsibility for the company and its liabilities. Being a company director has its own set of responsibilities and you should familiarise yourself with what these are if you’re going to establish this structure for your business.

What type of structure you choose will largely depend on what your business is like.  I’d suggest starting with the structure you see for yourself in the next two to five years.  It may be just you to start but if you plan on having employees within the first two years you may want a bigger structure.  You can usually find information about these structures at your tax department or inland revenue. If you’re not sure then seek professional advice and remember every structure has its own set of rules. As the owner it’s up to you to make sure you know what they are!

Till next time,

Sarah-Jane X

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