INSIGHT business coaching
BUSINESS 101: The Structure of Your Business Learn about the most common business structures that companies utilize
BY JAMES HOLLOWAY
T
he legal structure of your business can have a significant impact on the day-to-day operation of your company. The structure you select should be based on the goals and needs of the business. The type of structure can affect how much paperwork you must do at startup and on an ongoing basis. It also affects your tax burden. There are several types of business structures that are commonly used by most companies. Deciding on a business structure is never a one-time event. As your business grows or changes, you may need to restructure your company into one of the other types. A quick overview of each category should help you decide which business structure is right for your company. You should always check with your accountant or attorney before making any sort of changes to the way your business operates.
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Sole Proprietorship According to the Small Business Administration (SBA), “A sole proprietorship is the simplest structure chosen to start a business. It is an unincorporated business owned and run by one individual with no distinction between the business and you, the owner.” In a sole proprietorship, Julie Jones (the customer) purchases products or services from Sam Smith (the sole proprietor) and writes a check payable to Sam Smith for those products or services. One word of caution for anyone who operates a business in this fashion: You should keep a separate bank account for all business transactions. Being a sole proprietor has advantages (such as total control and ease of setup), but it also comes with some disadvantages (such as the business owner being totally responsible for any financial or legal disputes that arise).
