OWNER How many owners will there be in the business? Read more 

A business owner is an individual or entity who owns a business and is entitled to a share of any business profits. In some businesses, there are business owners who aren’t involved in the day-to-day decisions – but they might be involved in larger decisions about the business. In a company structure the business owners are known as shareholders, and the people who manage the company day-to-day can be directors. One person can be both the only shareholder and the only director.

PLAN Do you plan to look for investors to fund the business or do you intend to sell the business one day? Read more 

It’s easier to take on investors with a company structure – you just need to change the shareholders or the amount of shares held. It may also be easier to sell all of the business with this structure. To change or sell a partnership, you have to close it and create a new one with a new TIN number. A sole trader can only have one owner – if you want to sell the business you should get help from a professional advisor.

RISK Will the business require any large costs such as loans or debts? Read more 

If you have a partnership or are a sole trader, you’re personally liable for any business debts or costs. A company structure is a separate legal entity, so your personal assets and finances aren’t at risk if you have big business debts, unless you have provided a personal guarantee for any loans. If as a director your actions are seen as careless, you may be personally liable to the company for any losses. If there is a chance that your business could be taken to court, be sued, or you are unsure whether you’ll have big costs or debts, answer ‘yes’ to this question.

Sole trader
Limited Liability Company
Partnership

Limited Liability Company or Partnership

Sole Trader

Sole traders are people who start in business or contracting on their own, without registering as a company. Many small business owners, contractors and self-employed people begin as sole traders. It's the cheapest and easiest option, and may appeal to you if you want to make a living by following your passion, or to work as a contractor.

Benefits:
  • It's easy to set up -- you can get up and running quickly
  • Start-up costs are low -- there are no legal fees
  • You control the business and get all the profits
  • You can offset losses against other income:
Disadvantages:
  • You're liable for all debts -- this may put your personal assets at risk
  • It's harder to grow a sole trader business
  • Getting loans or investment can be more challenging
  • It's harder to sell as a working business.
  • If you find you want to change your business structure, for ex. because it's hard to attract investment as a sole trader, you can register your business as a company.

Limited Liability Company

A company, in a legal sense, is separate from the people who own it -- its directors and shareholders.

Shareholders are responsible for paying a company's debts -- up to the value of the shares they own in that company. They're also entitled to a dividend which is a share in the company's profits.

Doing business as a company can be more complicated than other business structures, for example:

  • You must file annual returns with both the Registrar General and The Grand Bahama Port Authority
  • Different rules apply to how a company and its shareholders pay tax
  • Details of a company's directors and shareholders must be provided to the Registrar General and The Grand Bahama Port Authority

To help when starting a company, it's a good idea to get as much advice as you can. Talk to people you know who've started companies or who advise business owners, for example: accountants and business mentors.

Benefits:
  • Shareholders' liability is limited to the amount they paid for their shares
  • You have more credibility in the market
  • It's easier to sell a business because it's a separate entity
  • The business can grow indefinitely -- it's not tied to one person
  • It's easier to get funding and investment.
Disadvantages:
  • There's more regulation than for sole traders and partnerships
  • Companies can need more investment to grow
  • Directors need to understand their responsibilities.

Partnership

A partnership is when two or more people or organisations form a business. Partners set out in a partnership agreement how they'll share profits, debts and work.

It's a popular structure with professionals, for example: architects, lawyers and accountants.

Benefits:
  • You can share the load of running a business
  • Costs are also shared
  • Partners can specialise and focus on strengths
  • Partners can bring in more capital investment
  • You have other people to talk to about the business
  • Partners can offset losses against other income.
Disadvantages:
  • Each partner is liable for all the partnership's debts -- putting personal assets at risk
  • You may be liable for your partners' business debts too.

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