Everyone who seriously thinks about their own business sooner or later will have to determine their status. Which organizational structure to choose – an individual entrepreneur or a Limited Liability Company (LLC)? And if you create your own organization, what kind of organizational and legal form should you choose? LLC is one of the best options for small and medium-sized businesses.
LLC is a company set up by one or several people, the approved capital divided into shares. You can find an online that will help you convert your business to this model. Sole proprietorship or individual entrepreneurship is another option that can work for your business. Choosing the light legal structure may prove difficult. We will explain to you how you can choose the best.
How to Choose the Right Legal Structure for Your Business
The first thing to consider when answering the question “which legal structure to choose?” when creating a business is the level of responsibility for the results of activities.
An individual entrepreneur is liable for his obligations with all property belonging to him, except for property on which, under the law, collection cannot be levied.
Responsibility for the results of the activity of a legal entity is limited to the amount of the value of the contribution made.
Second: the complexity of registering a business and the amount of registration costs
The easiest way is to register as an individual entrepreneur. Organizational costs will also be the most minimal.
For a legal entity, the registration costs will be higher, and the registration procedure will be more complicated. If you choose the form of organization of a legal entity, then, according to the specified criteria, LLC will be the undisputed option.
Third: the amount of the authorized capital
To register as an individual entrepreneur, the presence of authorized capital is not required – this is also an additional advantage of the status of an individual entrepreneur.
Fourth: accounting, tax accounting, and taxation
Accounting requirements are simplified as much as possible for individual entrepreneurs, and for accounting for a legal entity, you will need special knowledge. However, when applying special tax regimes, there is practically no difference.
The requirements for tax accounting are the same, but in practice, they are more loyal to individual enterprises. Taxation depends on the application of the appropriate regime: general, simplified, unified tax on imputed income.
Thus, to give an unambiguous answer to the question “which business legal structure to choose?” is impossible. Each option has its own nuances, pros, and cons. The decision should be made taking into account the specifics and characteristics of the future business.