《|| Is It Important To Have A Proper Business Structure During The Growth Phase? 📊 ||》

📍An entire arrangement of the basic problems and the growing pattern of every business platform in a systematic manner which seems to be more useful for any starters or entrepreneurs will basically become a hopeless task in the first phase of the business.

Small or medium-sized businesses basically vary in huge size and capacity for becoming growing platforms as they are basically characterized through independent actions, differences in their organizational structures, and different types of management styles. Thus, if the business doesn’t follow any business structure, then, it would become a certain problem for every business platform that arises at the similar stages during their development, and for any business owners, it would become a basic understanding which helps in assessing the main challenges such as the update of any technical systems, training of second-level managers and updating the business model in order to maintain the growth of the business. Having proper business structures would basically help in establishing the roles and duties for allowing the business system to run in a suitable process. When the business plans for doing new trending things like expansion of the working environment or new features to the products or services, it would become beneficial for the business for checking the other existing business structures to check their flexibility of supporting their new initiatives. Before getting further into the topic, we need to know about the business structure term, types of business structures, and the importance of business structure.

• Business Structure.

::- A business structure basically refers to any legal structure of certain business organizations which is recognized under the given jurisdiction or legal status and it is also the main determinant for taking up certain business activities such as capital raising, taking up responsibility for obligations of the business and having a brief review on the amount of taxes which the business organization owes to the tax agencies. Thus, for taking up any choices on the basis of legal structures, the business owners should always take proper consideration for the needs and goals of their business activity and understand the features of each business structure which is liable for their business growth. Picking up the most suitable or appropriate business structures basically creates legal recognition for any trade-up business.

• Types of Business Structures in various platforms::-

• Sole Proprietorship.

::- The most common and liable business structure is the sole proprietorship. Basically, a sole proprietorship business is owned and operated by only a single person or individual known as a sole proprietor. This business structure could be a good choice if the business owner is having complete control of their entire business as sole proprietorships do not create separate business entities for the platform. Sole proprietors basically contain both the business expenses and personal income for the personal tax return and thus, sole proprietors are basically responsible or liable for any of their business’s liabilities, debts, and losses.

• Partnership.

::- Partnership business basically refers to those businesses where two or more individuals own and operate together with their business platform. It is also a simple form of business structure that has two or more owners in the platform. It can also be considered in general partnerships and limited partnerships.

a) General partnership - It is basically owned by two or more people and here, the business partners manage the business platform and assumes the responsibility for the partnership’s debts. The partners could have equal shares of both profits and losses of the business.
The General partnerships basically allow the partners to work like co-owners and creating a partnership agreement lays out the specific shares for each of the partners during starting of the general partnership. Here, the profits in general partnerships are basically taxed based on the personal income level of the business.

b) Limited partnership - It maintains both the general as well as limited partners in the business platform. In this partnership business, we need to have at least one general and one limited partner for creating a limited partnership since limited partners basically serves as the business investors and they don’t have the full business decision rights and being a limited partner, it has only ownership rather taking any responsibility or risks of the business. Whereas general partners basically operate their own business activities other than assuming the partnership liabilities and being the general partner, they have the entire control as well as the responsibility of the partnership business.

• Corporation.

::- Corporation business structure basically gives the business entity a separate legal entity from its business owners. It maintains a complex and expensive set up which is required by the business owners for compiling with the tax requirements and regulations and also providing the strongest protection from any personal liabilities. A good corporation structure is a better choice for planning the expansion of the business platform and having more shareholders by keeping extensive recordkeeping and reporting of the working sector. Corporations basically maintain double taxation under which the company is taxed as a business entity and each shareholder’s personal income is also taxed.

• S- Corporation.

::- The S-Corporation or S-Corp is basically a type of corporation where both the profits as well as losses are passed directly through the owner’s personal income without being subjected to corporate tax rates and only the owners or the shareholders of the business are taxed. This corporate structure is basically designed for avoiding the double taxation drawback of regular C corps.
No other state's taxes are equally S-Corporation but most of the taxes are recognized in the same way in the federal government and are taxed by the shareholders. Many state's taxes has S-Corporation on profits above the limited line whereas other states does not recognize the S-Corporation at all and simply following the business as a C-Corporation. S-Corporation basically files with the IRS in order to get S-Corporation status by registering through their states.

• Limited Liability Company(LLC).

::- The limited liability company (LLC) is basically the hybrid business structure which is the combination of both the characteristics of partnerships and corporations. It generally provides personal liability protection for business owners while reducing tax and business requirements. Here, the business profits and losses are passed through the owners and each of the business owners requires the share of both profits as well as the losses in their personal tax returns and also it does not have a limitation to the number of shareholders in the company. In case of registering for an LLC, the entity needs to report its articles of association with the Secretary of State where the business work is done.

• Importance of business structure during growth of the business.

::- If the business owner wants to maintain the growth as well as the expansion of their business platform, then, they probably need to structure their business since their objective is to buildup the business and removing the barriers or obstacles for business survival. Many entrepreneurs or starters basically build their own platform in accordance with their own skills, abilities, knowledge, and vision. Thus, many business owners do not realize that the business structures could create a better chance of successful business. Having the right business structure, the business platform would have limited risks, protect their personal assets, and basic ability to raise capital by certain internal measures such as borrowing or capital contributions from the owners.

📍In case of choosing any business structure, it basically could create a difficult step in the business’s platform since it requires to know about their entire working pattern of the business system and in case the business owner chooses any business structure for improving their business growth, they need to choose only that structure which allows the most benefit for their business platform by considering the certain factors according to the business structure such as legal liability, taxes, cost, flexibility and future needs of their business development.

📌 SOURCES:- 🌐📥

• 📫https://hbr.org/1983/05/the-five-stages-of-small-business-growth
• 📫https://corporatefinanceinstitute.com/resources/knowledge/strategy/business-structure/
• 📫https://www.patriotsoftware.com/blog/accounting/a-guide-to-basic-business-structures/