Organisational Structures For Forming A Business – December 15th, 2017

There are two main forms to set up business, one is called incorporated businesses and the other is called unincorporated. The main difference between the two is the way they bear liabilities. While a business as a separate legal entity protects its owners from risk, sole ownership and partnership businesses owners have the shoulder the risk and liability themselves. Based on tax, legal and many other advantages there are few main organisational structures that can be used to form a business entity.  

Sole ownership: this in its simplest form is a business owned by a person. Many small businesses fall under this category. Though it is a popular option it is high in terms of risk and the owner has to bear all responsibility and liability. All taxes also fall under the responsibility of the owner as there is no legal separation between the owner and the business. Intern of advantages, this structure is popular, as a registering company Singapore will require only little paperwork and has only limited restrictions legally.  

Partnership: this is a venture that is formed by two or more parties agreeing to work together and share all profits and losses. The partners in this structre are not limited to individuals alone. In terms of advantages, these are popular because of the ease in which they can be formed and the ability to pool in resources and knowledge of several people. In terms of weaknesses the most prominent is that fact that all parties have to bear in the losses or liabilities the company makes. There is also a change that a negative action performed by one party can impact and harm all other members as well. The partners are also not limited to working always together, so they have relative freedom to ask permission from other members are not required, this is often a disadvantage and increases risk sometimes.  

Limited partnerships: company formation Signapore under this category a separate legal entity is created with a mix of general partners and limited partners. The control of the business is with the general partners and the limited partner invests and their liability is limited to the amount of investment made. This form of business actually requires more legal activities and documentation to be presented.  

Limited liability partnership: this is an organisational structure that is mostly used in professional services such as law and accounting. All partners involved in this form of business are protected from extra liability as the risk they carry is directly proportional to the amount of investment they have made. While this is a major advantage, this form of business also requires a lot of legal documentation and following of procedure.  

LLC: a limited liability company is a privately owned entity and it is not a corporation but a legal entity that provides limited liability to its members. This form of business allows protection of its assets and its members if the company is sued for some reason. These companies share several similarities with corporations and limited partnerships.  

Each form of structure has its own advantages and disadvantages, which needs to be considered when forming the desired business entity.  

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