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Choosing the best structure for your business

There are four main types of business structure to choose from
By Entrepreneur Staff |

Registration is one of the most important steps in putting up an enterprise. If done correctly, registration leads to official recognition from the government, granting your business all the privileges and responsibilities associated with the process.

In addition, registering your venture lets people know that they are patronizing or doing business with a reputable organization.

But before anything else, you must determine the type of business structure appropriate for your business. There are four main types of business structure: sole proprietorships, partnerships, corporations, and cooperatives.

Single or sole proprietorships are best for entrepreneurs who intend to run the business alone. Single proprietorships derive its legal personality from the entrepreneur. This means that the entrepreneur has absolute control over the business and shoulders all financial obligations.

A partnership is composed of two or more people, and has a legal personality distinct from those of the partners. The partners can open bank accounts under the partnership’s name. Your liability as a business partner is limited to your share of ownership in the company.

A corporation has a distinct legal personality and a limited liability feature. This means that all of its debts are its own, separate and non-transferable to its shareholders. To form a corporation, there must be a minimum of five incorporators, who will also form its board of directors. The corporate power resides with the board although major decisions may require the permission of stockholders.

A cooperative is basically a group organized to obtain maximum economic benefit of its members, but it cannot be dominated by a single member or a group. It also has a limited liability feature.

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