Setting Up An Informal Business Structure: 3 Things To Know
Are you starting a business? If so, have you thought about the type of business structure you want to use? You can choose from many types, but many small business owners choose an informal business structure. If you are unsure about what this means, continue reading to learn three important things about setting an informal business structure.
The Types of Informal Business Structures You Can Use
Informal business structures are the opposite of formal ones. You can choose from two main types of informal structures, which are sole proprietorships and partnerships. A sole proprietorship is the most informal type of business structure you can set up, and it is ideal for a company you own yourself. A partnership is also informal and is ideal for a company that has two or more partners.
The Benefits of Choosing an Informal Structure
You can experience several benefits from choosing one of these informal structures. The first benefit is they are easy to set up. You can visit a business attorney to set up one of these structures, but many people set them up themselves. If you want to make sure you set yours up correctly, you should hire a business attorney for help.
The second main benefit of choosing an informal structure is the cost. It is not expensive at all to set up a sole proprietorship or partnership. In fact, these are the most cost-effective options you can choose. If you choose a formal business structure, it will cost a lot more.
The Downsides to Informal Structures
In addition to the benefits, there are a few downsides to using an informal business structure for your new company. The main one is that it will not offer personal liability protection. If someone sues your company, they can take your personal assets if you do not have liability protection. Because of this, many people choose formal structures instead.
The other downside is that you will not receive any special taxation benefits through an informal structure. The result of this is that you might pay more money in taxes, but you can ask your attorney to learn more about this if you have questions.
If you would like to set up a business structure for your new business, you might want to talk to a business attorney. An attorney can help you learn the differences and options. From there, you can choose the right structure for your new venture.
Reach out to a law firm like Yevras Law Group, P.C. for more information.